Sports gambling powerhouse DraftKings (NASDAQ: DKNG) has entered into negotiations with Australian online bookmaker PointsBet Holdings (ASX: PBH) following an indicative takeover offer for PointsBet’s US businesses amounting to $195 million.
This move from DraftKings emerged a month post Fanatics Betting and Gaming (FBG) agreeing to acquire the same businesses for a cash offer of $150 million, aiming to amplify its stake in the sports gambling market.
The board at PointsBet deemed the non-binding, all-cash proposal from DraftKings as potentially superior to FBG’s offer, thus initiating steps to advance the due diligence procedure.
Clean Team protocol
In view of DraftKings’ competitive stance, PointsBet has called for a “clean team” and an associated protocol to handle the process.
It has also sought written confirmation on DraftKings’ stance regarding the funding of cash burn in its US online sports betting, iGaming, and retail sportsbook operations. FBG, in its recent move, limited the cash burn to $21 million from July 1.
Despite these developments, the PointsBet board continues to recommend its shareholders to favor the FBG deal.
A deadline of 27th June has been set for DraftKings to finalize its transaction documents.
The initial indicative offer from DraftKings is considered by PointsBet as a potential precursor to an offer that could surpass that from FBG.
PointsBet, being the seventh largest sports betting operator in the US, predicted a loss in the range of $115 million to $123 million for the half-year ending June.
In a bid to sell its North American business, the company has sought the services of investment bank Moelis & Co. Post the US business sale, PointsBet’s chief executive officer, Sam Swanell, anticipates that the company’s operations in Australia and Canada would reach “break even” within a year.
PointsBet is also contemplating selling its Australian operations.
With a market cap hovering around $10 billion, Nasdaq-listed DraftKings stands as a prominent contender against PointsBet in multiple US markets. DraftKings tabled its indicative offer a month following FBG’s proposal, valuing it $45 million higher.
FBG executives have been skeptical of the DraftKings deal, perceiving it as an effort to decelerate their own transaction.