10.07.2023

by Mateusz Mazur

The Fanatics-Pointsbet Saga: Revenge, Acquisition, and a Game-Changing Deal

The die is cast. On June 30, 2023, the stockholders of Pointsbet voted to sell the business to a growing company – Fanatics. What made the Australian-origin bookmaker turn out to be an exceptionally tasty morsel for Fanatics? What were the motives of DraftKings, who on the last straight joined the race to take over Pointsbet? What does this deal mean for the US market and why could it prove to be a breakthrough? We invite you to take a look at our analysis.

99.16% of Pointsbet stockholders voted for the $225 million Fanatics offer. Thus, the parties moved to the next stage of the sales process, but the date of completion of the transaction has not yet been set.

With the upcoming stockholders voting, the past few weeks have been extremely exciting for all parties involved, as well as industry observers. A few days before the general stockholders’ meeting, the struggle to acquire Pointsbet was brought to a head when DraftKings unexpectedly joined the game.

Was the DraftKings offer really just a bluff?

A month after Fanatics presented their bid to acquire Pointsbet, DraftKings joined the fight for a high stake. The $195 million bid forced Fanatics to respond strongly. The sportswear manufacturer, who decided to try his luck in the sports betting industry some time ago, immediately launched an offer worth $ 225 million, which exceeded his initial offer by $ 75 million.

The offer of DraftKings dismayed not only Fanatics, but also observers of the US industry who wondered about the motives behind the actions of the gambling giant. As assured by a DraftKings spokesperson, the offer “centered around the significant synergies and financial rationale, along with the interesting product and technology capabilities we would acquire through the proposed transaction.”

New York Post does not believe in good intentions of DraftKings which, citing two independent sources, reports that the company’s involvement in the race to acquire Pointsbet was nothing more than an act of revenge on DraftKings CEO Jason Robins against Fanatics head Michael Rubin.

DraftKings CEO – Jason Robins 

At the beginning of 2021, Fanatics and DraftKings were close to a 50-50 merger, however, according to the daily, Michael Rubin decided to walk away from the table at the last minute, which definitely struck the deal. Over the past two years, the DraftKings valuation amount has fallen by more than half, to $11.5 billion. The information, that the DraftKings offer was just a bluff and Robin’s personal revenge, electrified the industry.

No doubt, the story of harm and revenge is extremely media. Does it have anything to do with truth? It must be admitted that, at first glance, the Pointsbet acquisition will benefit Fanatics far more than it could benefit DraftKings, which enjoys an established position as a second force in the US market.

Even if the gambling giant managed to win this bidding, it seems that it would not bring DraftKings real measurable benefits. The game was primarily about the scope of presence on the US market, as well as about technology. Unlike Fanatics, DraftKings is already close to its glass ceiling in both areas.

Market access is more important than market shares

Pointsbet is definitely not a tycoon in the difficult US market. The bookmaker is currently present in 14 states, where it can boast of a barely residual market share. A larger share is certainly a good starting point, but for Fanatics the most important was the access to markets, some of which have key status.

The closing of the deal will give Fanatics the opportunity to enter four of the five most profitable US markets – New York, New Jersey, Pennsylvania, and Illinois. The game was primarily about New York, the undisputed leader of the U.S industry. Fanatics failed to enter the market organically as the state has already reached the limit of available licenses. So, the only way to appear in New York was through the acquisition.

For Fanatics, who dream of becoming one of the major forces in the US market, the acquisition of Pointsbet has thus become a relatively uncomplicated way to achieve their goal. Well… at least until DraftKings came into play.

The issue of market shares is one of the reasons for believing that the offer made by DraftKings actually had a hidden meaning. The company would obviously gain from the Pointsbet acquisition, but would it gain enough to undertake a $195 million investment in an operator that, in its efforts to achieve profitability, has recently been forced to make massive cost cuts?

While the acquisition of Pointsbet would allow DraftKings to rise to market leadership in Illinois and consolidate its shaky position as a leader in Indiana, it is worth asking yourself again, if a game for such a huge company would really be worth a candle?

So maybe it was something else, something that could not be determined as easily as the percentage of market shares.

Technology at the weight of gold

The second element, crucial for the attractiveness of this transaction for Fanatics, is undoubtedly technology. It is unlikely that anyone needs convincing that it plays an extremely significant role in the success of a bookmaker. Certainly DraftKings, which has significantly expanded its portfolio of exclusive technology solutions with the acquisitions of SBTech and Golden Nugget, does not need convincing. The company already has its own sports betting platform and is aiming to make its casino platform independent. The key to this would certainly not be the potential acquisition of Pointsbet.

It makes much more sense to acquire the Australian business from the point of view of Fanatics, who still do not have their own technology solutions. Now, however, the bookmaker can appear in markets in New York, New Jersey, or Pennsylvania without the need for external technology providers. In the long run, this will mean huge savings for the company. It is also a huge step toward profitability.

There is another valuable item on the table. This is the Pointsbet agreement with NBC Sport, which put bookmaker in the minds of many NFL fans. For Pointsbet, this was no turning point that would significantly improve the operator’s financial performance, but for the sportswear manufacturer, which has worked closely with the NFL for years and opened its first bookmaking outlet at FedEx Field in January this year, the deal with NBC seems even more valuable.

Let’s leave the topic of a more or less sensible offer made by DraftKings. Once the transaction is completed, the Pointsbet brand will be in the Fanatics portfolio and it is very likely that the company will make much better use of it than the DraftKings, as well as Pointsbet itself would have done.

Despite the hardships involved, Fanatics are extremely motivated to make their presence felt on the US betting market. The company already has several channels to reach the recipient, which Pointsbet could not boast of. This includes cooperation with the NFL or a mailing list reaching almost 100 million contacts. With the acquisition of Pointsbet, the company will be able to use these resources even more efficiently.

It became clear some time ago that Michael Rubin’s big announcements about the presence of Fanatics in a dozen of states by the end of 2023 are impossible to be implemented through organic growth and a sportswear tycoon who is now trying to conquer the sports betting industry will need to make one or more acquisitions.

Fanatics CEO – Michael Rubin

The Fanatics are aiming high and trying to reduce the distance to FanDuel and DraftKings, they intend to fight for the third position in the US market. In addition to sports betting, Fanatics also seems to be trying to enter the online casino market. The presence in New Jersey, Michigan, and Pennsylvania, one of the few states where online casino games are legal, can certainly be crucial here.

The next few months will be exciting for Fanatics. The company broke the glass ceiling, which has so far dominated its development. The acquisition of Pointsbet and the bookmaker’s characteristic wide range of heavy users is an extremely interesting and perhaps groundbreaking event for the industry. Fanatics need to skillfully use the tools they have had for a long time for purposes that were not available to them until June 30, 2023.

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