Fanatics Finally Makes Deal, Grabs PointsBet for $150 Million

Posted on: May 15, 2023, 01:34h. 

Last updated on: May 15, 2023, 05:45h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Following months of speculation, PointsBet (OTC: PBTHF) is poised to sell its US operations to Fanatics for $150 million in cash.

Fanatics valuation
Fanatics founder Michael Rubin at an event in 2021. The company is acquiring PointsBet USA for $150 million in cash. (Image: Getty Images)

The companies announced the transaction in a joint statement released Sunday. That confirmation arrived just weeks after it was reported PointsBet hired investment bank Moelis & Co. to explore a sale of its US and Canadian sports wagering business.

Fanatics and PointsBet are excited to enter into an agreement for Fanatics Betting and Gaming to acquire PointsBet’s US business,” according to the press release. “While there are still several steps in the process to complete the acquisition, both parties are confident in the outcome. Fanatics Betting and Gaming and PointsBet will provide further details of the proposed deal and timely updates in the coming weeks.”

Sydney-listed PointsBet is slated to hold a shareholder vote on the deal in June. Only the target’s US business is part of the transaction with Fanatics. PointsBet’s Aussie operations have also been the subject of rampant takeover chatter. The company is retaining its Canadian sports wagering unit.

PointsBet Likely Needs Deal to Find Finish Line

PointsBet has long been considered a takeover target. In addition to closely held Fanatics, Bally’s (NYSE: BALY) and Penn Entertainment (NASDAQ: PENN), the latter owning an equity stake in the target, were considered potential suitors.

The proposed acquisition arrived none too soon for PointsBet. That’s because the operator isn’t profitable in the US and by its own admission, doesn’t expect that its online sports wagering efforts in this country will be cash flow positive over the near term. Owing to its dwindling cash position in the US, PointsBet may not be able to adequately finance its operations here. It could be forced to sell shares at a steep discount to current market prices if the transaction with Fanatics collapses.

“PointsBet’s current corporate cash balance is insufficient to fund the US Business through to profitability, and as such, should the Proposed Transaction not proceed, the Company would need to raise additional capital in the near term,” according to the Australian firm.

NBCUniversal, which took a 4.9% equity stake in PointsBet in 2020, will be compensated, and related financial commitments will be transferred to Fanatics Betting & Gaming.

“NBCUniversal has also released PointsBet Holdings Limited from its guarantee obligations under its Media Services Agreement from final Completion, and has irrevocably waived its right to exercise the equity options previously issued. These options have been terminated today,” added PointsBet.

Fanatics Finally Makes a Deal

While PointsBet has long been rumored to be a target, sports betting industry observers have been waiting on Fanatics to make a deal for just as long, if not longer.

The company, valued at $31 billion in private markets last December, has been tied to a slew of takeover speculation. Those rumors involved BetParx, Tipico, Rush Street Interactive (NYSE: RSI), Churchill Downs’ (NASDAQ: CHDN) TwinSpires Racing unit, Swedish gaming giant Betsson, and WynnBet, among others.

With PointsBet USA, Fanatics gains a cost-effective avenue for jump-starting its sports wagering division and could pave the way toward meeting its goal of being live in at least a dozen states by the start of the 2023 football season.