Fanatics increases PointsBet US takeover offer to $225M, DraftKings out of bidding race

The dispute over the future of PointsBet's U.S. operations seems to have concluded with Fanatics presenting a revised offer of $225 million, a 50% increase from their original proposal. In a statement released on Tuesday evening, the PointsBet board "unanimously recommended" accepting the cash offer. PointsBet shareholders will vote on the Fanatics offer on Friday. 

DraftKings, who had previously submitted a non-binding offer claiming it was superior to Fanatics' initial bid, was unable to finalize a binding offer before the deadline. This sale comes after Fanatics had initially reached a deal with PointsBet for approximately $150 million, only to be outbid by DraftKings at the last minute a month later. It should be noted that the actual cost for PointsBet is much higher when adding in the massive price of PointsBet’s four-year $250 million advertising deal with NBC.

As per a company statement,  the PointsBet board believes the new Fanatics proposal is "superior in terms of both pricing and certainty of being able to complete on a timely basis."

The new Fanatics offer features payments made in two stages, similar to the original. In the new bid, Fanatics will pay $175 million at closing (up from $100 million in the original offer), and another $50 million due in February 2024—same as the original deal. In other words, the initial $175 million payment includes the entirety of the $75 million that Fanatics added to its proposal. The PointsBet board also said the capital distribution to shareholders under the new offer would be $0.93-$0.96, while it was $0.71-$0.73 under the original proposal.

The deal helps solidify Fanatics as a mainstay in the sports betting market, having gathered massive assets in the app’s user experience and user interface departments while acquiring expert traders to help manage its risk in the new market. "Fanatics is probably breathing a small sigh of relief," an industry executive with knowledge of the situation said, as reported by the New York Post.

"While the company would have been fine without the acquisition, moving faster in the current environment is likely better, and the PointsBet deal allows Fanatics to move at maximum speed," the executive added.

Furthermore, the deal also gets Fanatics access to multiple keystone states for its app, including New York, New Jersey, Pennsylvania, Colorado, Illinois, Indiana, Kansas, Louisiana, Michigan, Virginia, and West Virginia. The apparel-turned-sports-betting company is already licensed and in beta testing in Massachusetts, Maryland, Ohio and Tennessee.

Headquartered in Australia, PointsBet launched in the U.S. in 2019 and was one of the more aggressive sportsbooks in its first few years after closing a $500 million deal with NBC Sports and pioneering a partnership with the University of Colorado.

Its business has been flagged recently in the face of mounting competition and rising customer acquisition costs. The NBC deal was amended in February; the Colorado deal was terminated in March. PointsBet’s Canada business is not part of the proposed takeover.