Shareholders of sports betting states in the coming months.
Fanatics currently accepts sports wagers in only four states, but the purchase will give the operator access to more than 15 U.S. jurisdictions upon the completion of the transaction. The meeting mostly lacked suspense after PointsBet’s board unanimously recommended Fanatics Betting and Gaming’s (FBG) improved proposal on Tuesday night. The board unilaterally endorsed the bid from Fanatics after DraftKings failed to meet a Melbourne deadline that evening to make a binding proposal for PointsBet’s U.S. division.
initial $150 million proposed offer announced last month. PointsBet is clearly more valuable to Fanatics than DraftKings, Eilers & Krejcik Gaming wrote in its “EKG Line” newsletter earlier this month, as the transaction “expedites its path” to becoming a viable online sports betting product.
More than 99% of cast shareholder votes (195,567,388) approved the Fanatics transaction, with fewer than 1% of cast votes (1,649,953) against the measure. There were 41,722 abstentions.
The general meeting began at 11 a.m. Friday in Australia, some 14 hours ahead of New York time.
Pivotal moment for Fanatics 5z526v
“We are thrilled that the shareholders of PointsBet Holdings Inc. voted to approve our acquisition of the U.S. businesses of PointsBet,” a Fanatics spokesman wrote in a statement provided to Sports Handle. “This is a pivotal moment for Fanatics Betting and Gaming that will accelerate our growth in the legal online sports betting, advance deposit wagering, and iGaming markets in the United States.”
At @PointsBet_AU's meeting on Fri a motion for the disposal of the company's U.S. business to #Fanatics ed overwhelmingly. Fanatics described it as a pivotal moment for the company that will accelerate its growth in the online sports betting, ADW and iGaming markets in the US pic.twitter.com/sBQ0kUCrGz
— Matt Rybaltowski (@MattRybaltowski) June 30, 2023
Beset by low U.S. market share and capital constraints, PointsBet hired investment bank Moelis & Company to seek a potential buyer in April. Amid intense speculation at last month’s SBC North American Summit, Sports Handle broke the news that PointsBet had entered into advanced negotiations with Fanatics. Less than 72 hours later, Fanatics entered into an agreement to acquire the Australian-headquartered company’s U.S. division, a transaction that has potential to become a transformative deal for the domestic sports betting space.
“Once we decided to sell the U.S. business, we turned our attention to finding the right business partner,” PointsBet Chairman Brett Paton said at Friday’s meeting in Sydney. “Fanatics identified in PointsBet many of the attributes needed to be successful in entering the online market. In turn, Fanatics has a strong brand and an extensive sports customer base with a fanatical interest in sports.”
PointsBet’s rationale for selling U.S. division 413ki
Though PointsBet achieved a modicum of success in the States, the financial challenges of competing against some of the world’s largest companies in the industry proved to be too much to overcome, Paton indicated. If PointsBet continued operations in the U.S., it would have been difficult for the division to achieve positive cash flow in the near term, he conceded. As a result, maintaining U.S. operations would have required significant capital and further capital raises, according to Paton. While PointsBet is exiting the U.S. at a loss, the company did not disclose the actual figures at Friday’s meeting.
“While there have been reasonable losses incurred, the goal was to stabilize the company from a capital perspective given the ongoing losses from the U.S.,” said Andrew Catterall, PointsBet’s CEO of its Australian division.
Meanwhile, Paton bemoaned a duopoly shared by market leaders FanDuel and DraftKings, which collectively maintained a share of approximately 80% of the U.S. sports betting market as of May 2023. Although there are about 60 online sports betting operators in the U.S. market, only seven brands, including PointsBet, have attained a market share of at least 1%, he explained. One unnamed company, according to Paton, has spent around $2.5 billion on growing its digital gaming brand, but has only achieved single-digit market share in the online sports betting space.
Big: FanDuel announces they have reached 50% market share in the United States, 86% of their bettors placed at least one parlay in 2022 https://t.co/qdbatzsqJp
— Darren Rovell (@darrenrovell) March 2, 2023
The two market leaders maintain an inherent advantage from their legacy brands in daily fantasy sports, PointsBet noted, a vertical that the Australian company does not offer.
“We doubt anyone expected FanDuel and DraftKings to become effectively a sports betting duopoly,” Paton said. “It points to the huge incumbency benefits these companies have in the U.S. market.”
NBC deal in retrospect 316n19
From the conclusion of Friday’s shareholders meeting to the completion of the transaction, PointsBet’s funding requirement for the U.S. business will be capped at approximately U.S. $21 million. Fanatics will inherit the remainder of PointsBet’s $250 million advertising commitment to NBCUniversal under PointsBet’s 2020 deal with the broadcast giant.
One shareholder pressed PointsBet on whether the company regrets forging a deal with NBC, given the financial commitment. The $500 million deal, reached in August 2020, gave NBCUniversal a 4.99% equity stake in PointsBet. Based on the market environment at the time, most U.S. operators saw the NBC assets as a “real gem,” said Sam Swanell, managing director and group CEO of PointsBet Holding Limited, at Friday’s meeting.
While FanDuel and DraftKings had a built-in advantage with large customer databases from fantasy sports, PointsBet had to start from scratch, he noted.
“In retrospect, who knows, but it was certainly the right decision at the time,” Swanell said. “It hasn’t been enough for us to bridge that gap required to achieve the scale that we [sought].”
Susquehanna analyst Joe Stauff estimates that Fanatics can achieve “synergies” through PointsBet largely based on its ability to amortize the NBC fixed payments over its various assets (merchandise, collectibles, and sports betting), he wrote in a May research note.
What’s next for Fanatics? 103e4o
Fanatics made its sports betting debut in January with the Maryland.
After completing a $700 million capital raise last December, Fanatics received a valuation of $31 billion. Fanatics CEO Michael Rubin has stated ambitions of becoming the largest sportsbook in the U.S. market by 2033.
The first part of the PointsBet deal is scheduled to be completed by Aug. 31. At that point, Fanatics will gain the right to acquire the entities that own and operate PointsBet’s business in at least three states. Consequently, Fanatics may look to launch an online sportsbook in prominent states such as Pennsylvania by the start of the NFL regular season.
Despite exiting the U.S. market, PointsBet will maintain its brand in Australia, Canada, and India. PointsBet will retain Scott Vanderwel, who has served as CEO of its Canadian business since August 2021. As of Friday morning, it remained unclear if PointsBet U.S. CEO Johnny Aitken will the staff at Fanatics Betting & Gaming, according to two sources who spoke with Sports Handle. Paton did not address Aitken’s status with PointsBet in a letter to shareholders on Friday.
Is Australia on the cusp of a total ban on online sports betting ads?
Great to @patstackmedia to pull it apart on @abcsport Daily #auspol https://t.co/0tmkEGnnBB
— Matthew Doran (@MattDoran91) June 29, 2023
Back home, Swanell also addressed the Australian landscape roughly 48 hours after a Parliamentary committee issued a report with 31 draft recommendations for curbing compulsive gambling, including a ban on all online advertising over the next three years. Swanell believes there will be considerable amount of consultation with the racing industry, sports leagues, and rs on potential solutions, moving forward.
He even used a well-known idiom in the business world to describe a practical result after all options are exhausted.
“We believe that as a net-net, we would welcome standards being adhered to at the level at which we operate at, and that our established place in the market from a brand perspective, top-tier sort of product and getting better, you know, that net-net, it won’t inhibit our growth going forward,” he said.
On the Australian Stock Exchange, PointsBet opened Friday morning’s session at A$1.75 per share. Shares ticked up by 2% to A$1.77 in Friday morning’s session. While PointsBet is down considerably from 2021 levels of A$15, shares have rallied more than 15% since news of an impending deal first broke in May.
