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DraftKings is eyeing an expansion of its US operations with a new strategic move. The firm has expressed its desire to buy out the US division of PointsBet, a well-known Australian sports wagering conglomerate. On June 16, 2023, DraftKings unveiled its proposal, proposing a buyout deal of $195 million to the Non-Executive Chairman and the CEO of PointsBet Holdings Ltd.
DraftKings’ bid outshines the existing offer by Fanatics, demonstrating a 30% increase over their proposed $150 million. According to reports, the offer from DraftKings matches the terms set by Fanatics, maintaining a “debt-free and cash-free basis”.
The renowned sports betting leader plans to fund the acquisition directly from its cash reserves, eliminating the need to source additional capital. DraftKings confidently assures that it can efficiently navigate the necessary regulatory approvals and other procedures for a smooth and swift acquisition process, surpassing the timelines presented by Fanatics.
DraftKings regards its proposal as a “superior offer,” highlighting the opportunity to leverage synergistic benefits from the integration of PointsBet’s US operations with DraftKings’ well-established US market position. Through this acquisition, DraftKings intends to enhance its product portfolio, strengthen its marketing capabilities, and expand its in-house capacities. DraftKings has entrusted BofA Securities and The Raine Group to provide financial advice throughout the acquisition process.
In words of Jason Robins, DraftKings’ CEO and Co-founder, “While we continue to focus on operating more efficiently and driving substantial organic revenue growth in the United States, we will also look to prudently capitalize on compelling opportunities at attractive valuations, as is the case with PointsBet’s U.S. business.” Robins also believes that DraftKings is exceptionally positioned to provide this superior offer due to their scale and potential to generate meaningful synergies from the acquisition.
Jason Park, DraftKings’ CFO, expects the acquisition to boost their Adjusted EBITDA potential for 2025 and beyond. “We expect this transaction to increase our Adjusted EBITDA potential in 2025 and beyond and not impact our expectations of achieving positive Adjusted EBITDA in 2024. We are excited about the potential synergies available by acquiring PointsBet’s U.S. business, including offering our customers interesting new bet types and accelerating our roadmap of bringing in-house more of our mobile sports betting technology.”
PointsBet initiated the sale of its US business in April 2023 to re-center its focus on its home market. It engaged the investment bank, Moelis & Company, to oversee the transaction. Now, the largest sportsbooks in the US are vying for this golden opportunity. With DraftKings lifting the bidding price to $195 million, PointsBet is left to weigh its options and decide whether Fanatics will raise the stakes or concede to DraftKings.