Fanatics Improves Bid to Acquire PointsBet After Late DraftKings Offer Emerged

The past month has been a rollercoaster of bidding wars between Fanatics Betting and Gaming and DraftKings. Fanatics first expressed interest in purchasing the US assets of PointsBet in May, reaching an agreement in principle to buy the online gambling company’s business. However, as the deal awaited shareholder approval and regulatory requirements, DraftKings submitted a bid of $195 million, hoping to sway PointsBet’s shareholders.

However, in another interesting turn of events, Fanatics re-expressed its commitments to the deal by improving its bid by 50%. Fanatics will now pay $225 million to purchase PointsBet, while shareholders vote on the 30th of June.

On Tuesday, June 27, those who had been closely following the trajectory of the PointsBet acquisition were greeted with a shock. Fanatics announced that it was improving its offer in the late hours of the day, sending PointsBet’s board into an excited frenzy. The sports merch giant revealed that it was increasing its bid from $150 million to $225 million.

This increment came weeks after DraftKings proposed a $195 million to counter Fanatics’ former offer. Had the DraftKings deal been unmatched, it would have opened up the possibility of the operator owning over 20% of the Michigan online gambling market share. Besides, despite already agreeing to support the Fanatics bid, the PointsBet board explained that they were open to exploring the proposal from DraftKings, thus stiffening the competition.

It appears that the move has paid off as Fanatics’ representatives have notified PointsBet of the intention to increase their initial offer by 50%. DraftKings has also pulled out of the race after it failed to finalize its bid before the Tuesday June 27 deadline.

PointsBet has since confirmed the new bid and expressed support for Fanatics Betting and Gaming. Brett Paton, the Chairman of PointsBet was quoted in a press release to have said the following:

“The Board unanimously supports the improved proposal from Fanatics Betting and Gaming, which provides a superior price plus certainty. 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.”

The statement also mentioned that the company aims to leverage the opportunity to expand into Australian and Canadian markets.

Many stakeholders and observers have tagged the recent events a “pump fake” move by DraftKings. Since Fanatics sent an improved bid and DraftKings failed to finalize its offer before the due date, the big question has been whether DraftKings was serious about its initial bid or simply wanted to drive up the price of PointsBet assets.

Michael Rubin, the CEO of Fanatics, told news sources that he had doubts about the offer submitted by DraftKings. “It’s a move to delay our ability to enter the market,” Rubin informed CNBC. “I guess they are more concerned about us than I would have thought.”

If the offer was indeed a plan to run up the price, then there’s no doubt that PointsBet must have been complicit in the plan. But as it stands, talks of an intentional pump fake are merely speculations and there may still be a few twists and turns ahead of the stakeholders vote on June 30. Either way, PointsBet has DraftKings to thank as they may now walk away with a far better deal on their hands.

Had the DraftKings bid been finalized and unmatched by Fanatics, DraftKings would have owned three of the fifteen online casino operators in Michigan. With DraftKings Casino MI and Golden Nugget Michigan Casino already within the control of DK, access to PointsBet would have given it a massive 20% of the total online casino and sports betting market share.

With Fanatics now the favorite to emerge as new owners of PointsBet, Michiganders can anticipate a Fanatics sportsbook coming sooner than a casino. That’s because Michigan is not one of the states where Fanatics has a license and would have to start a fresh process of getting one. Plus, a sportsbook license is easier to get than a casino license.

But as far as we can tell, there are only two outcomes for PointsBet customers. It is either Fanatics continues running operations under the PointsBet gambling brand name or it stops operations until it obtains its own license, reverting Michigan to 14 online casinos. This would be similar to the case of TwinSpires and the Hannahville Indian Community, until Sports Illustrated got the deal to manage the tribe’s online gambling operations.