26.06.2023

by Mateusz Mazur

High-stakes battle: DraftKings and Fanatics CEOs clash in race to acquire PointsBet

The sports betting industry is buzzing with anticipation as the CEOs of two industry giants, Jason Robins of DraftKings and Michael Rubin of Fanatics, lock horns in a fierce battle to acquire PointsBet. Sources close to the situation reveal that Robins recently launched his bid, marking a revenge move two years after DraftKings and Fanatics engaged in secretive merger talks.

Revenge bid

Insiders disclose that DraftKings was deep in negotiations with Fanatics in early 2021, aiming for a 50-50 merger valued at approximately $24 billion for each company. However, the talks came to an abrupt halt when Rubin, with a net worth of $11.4 billion, walked away from the deal near its completion.

Since then, Robins, whose company’s shares have plummeted, leading to a reduced valuation of $11.5 billion for DraftKings, has held a grudge against Rubin, according to sources. Industry experts describe Robins’ current bid as a retaliatory move, fueled by the desire to level the playing field.

A spokesperson for DraftKings issued a statement emphasizing that their bid for PointsBet is driven by financial rationale and synergies, denying any personal motives. Fanatics representatives declined to comment on the matter.

Surprising offer

On June 16, DraftKings surprised the market by making a last-minute offer of $195 million to acquire PointsBet’s US business, surpassing Fanatics’ $150 million deal that had been reached a month earlier by 30%. This unexpected move by DraftKings throws a wrench into Fanatics’ plans to establish itself as the third major player in the sports betting space.

Rubin voiced his concerns about DraftKings’ bid, suggesting that it was an attempt to delay Fanatics’ entry into the market. Presently, FanDuel holds the largest market share in US sports betting at around 45%, followed by DraftKings at 29%, with no other competitors coming close, according to Eilers & Krejcik Gaming.

PointsBet holds one of the nine licenses to offer online sports betting in New York, a highly sought-after market. Given that New York has no plans to issue additional licenses, industry insiders believe that DraftKings’ primary motive is to prevent Fanatics from acquiring the valuable New York sports betting license.

Crucial market

To become a significant player in the industry, it is crucial to establish a strong presence in New York, the largest state market for sports betting. The potential for cross-marketing the sports betting service to Fanatics’ extensive customer base, which includes millions of officially licensed sports team gear buyers, further amplifies the significance of securing PointsBet’s US operations.

However, acquiring PointsBet comes with risks for DraftKings. PointsBet intends to request a “hell or high water” merger agreement, which would compel DraftKings to acquire their US operations, even if regulatory clearance is not obtained. Obtaining approval from the Federal Trade Commission poses a challenge, as regulators might be wary of allowing one of the two dominant sports betting giants to eliminate a promising competitor.

The PointsBet shareholder vote on the Fanatics offer is scheduled for June 30, prompting Robins to make a decisive move in the near future. While DraftKings reported a loss of $390 million in the first quarter of 2023, the company holds $1.1 billion in cash, making a $195 million loss manageable if the company achieves its projections of profitability next year. However, sources caution that this leaves little room for error. Fanatics, a privately held company, was valued at $31 billion in a recent fundraising round in December.

The industry awaits the outcome of this high-stakes merger battle, which could reshape the sports betting landscape and determine the future of these industry titans.

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