It appears DraftKings’ fourth-quarter effort to acquire PointsBet’s US assets will fall short.
But, PointsBet should be sure to send DraftKings a thank you card. A really big one.
Tuesday night, it was announced that Fanatics increased its initial offer to acquire PointsBet’s assets from $150 million to $225 million in order to secure the deal.
PointsBet shareholders will voted to approve the Fanatics offer this week, which had unanimous support from the board.
The latest will prevent DraftKings from owning 20% of the Michigan online casino and Michigan online sportsbook operations. It will also introduce a new online operator into the state.
DraftKings’ outbid of Fanatics gets outbid
In May, Fanatics had agreed to acquire the US operations of PointsBet for $150 million.
Both companies announced the deal pending the shareholder vote a month later and regulatory approvals.
Last week, DraftKings decided to throw its hat in the ring with a $195 million offer. While the board continued to support the Fanatics deal, PointsBet said it would explore the offer from DraftKings.
However, DraftKings was unable to finalize a binding offer by Tuesday evening, while Fanatics increased its original agreement by 50%. PointsBet released a statement Tuesday night confirming the plans.
“The Board unanimously supports the improved proposal from Fanatics Betting and Gaming, which provides a superior price plus certainty,” PointsBet Chairman Brett Paton said in a release. “Fanatics Betting and Gaming conducted their diligence process and negotiations in a highly professional manner at all times. The offer to ‘front end’ the additional consideration is an element which we regarded as a welcome and significant benefit to our shareholders.”
Did DraftKings run up the price on Fanatics?
The timeline of this bidding war is interesting.
Was DraftKings serious in its efforts to acquire PointsBet, or was it simply an effort to cause Fanatics some difficulties in expanding its online brand and impact?
Fanatics CEO Michael Rubin was certainly skeptical of the DraftKings offer.
“It’s a move to delay our ability to enter the market,” Rubin told CNBC. “I guess they are more concerned about us than I would have thought.”
DraftKings touted a desire to grow its overall market share as part of the move. In Michigan alone, it would have given DraftKings access to three of the 15 online casinos and sportsbooks. Along with PointsBet Casino, it would also own DraftKings Casino and Golden Nugget Casino.
Either way, DraftKings’ move forced Fanatics to have to make a sizable increase in its final deal.
Fanatics will now have access to 15 states as it takes over the seventh-leading sports betting operator in the country.
When will Fanatics go live in Michigan?
Now that the deal is approved by shareholders, Fanatics can go about making efforts to get licensed in Michigan.
It currently has access to four states right now (Maryland, Massacusetts, Ohio and Tennessee), but has yet to officially launch an online sportsbook in those states.
The sports memorabilia and sporting goods company has expressed a desire to be operational in a majority of PointsBet states by the start of the 2023-24 NFL season.
While getting the sportsbook license shouldn’t be difficult here in Michigan, getting an online casino license could take more work. Fanatics online casino doesn’t exist thus far in the US, but PointsBet does have access for four states with legalized online casinos.
With PointsBet licensed in Michigan, Fanatics could opt to continue to run PointsBet Casino until it has earned licensing for its own branded online casino.
Could Michigan return to 14 online casinos?
PointsBet is partnered with the Lac Vieux Desert Band of Lake Superior Chippewa Indians and Northern Waters Casino Resort for online operations.
Fanatics takes over that deal and could see a similar transition to what took place with TwinSpires and the Hannahville Indian Community.
TwinSpires elected to leave the online casino and sportsbook industry in 2022, leaving the operators of Island Resort & Casino to seek a new online provider.
Sports Illustrated got the deal and opened the online sportsbook in August of 2022. However, SI needed longer to secure an online casino license in Michigan. Eventually that was approved in February of 2023.
Between that time, Michigan had just 14 online casino options, but 15 online sportsbooks.
