Sports betting giant DraftKings is making a $195 million, all-cash offer for PointsBet’s US assets. The proposal comes about a month after Fanatics had agreed to buy the Australian company’s US operations for $150 million in an effort to boost its presence in sports gambling.
The news is a bit surprising given that DraftKings is already in a good position as one of the sports wagering industry leaders. Now, Fanatics is on the hot seat in order to get into the sports betting game in states like Illinois.
Pump the brakes on a Fantatics Sportsbook coming to Illinois
The Illinois sports betting market is considered to be in its early stages. There are currently seven legal, regulated Illinois online sports wagering sites for people 21 and older.
Fanatics hoped to join the party after making a move to buy PointsBet’s US business. However, PointsBet might want to change course with DraftKings’ rival bid now on the table. DraftKings has submitted an offer of $195 million for PointsBet’s US operations, representing a 30% increase over Fanatics’ offer of $150 million.
“While we continue to focus on operating more efficiently and driving substantial organic revenue growth in the United States, we will also look to prudently capitalize on compelling opportunities at attractive valuations, as is the case with PointsBet’s US business,” said Jason Robins, DraftKings’ chief executive officer and co-founder. “We believe DraftKings is uniquely positioned to submit this superior proposal due to our scale and corresponding ability to generate meaningful synergies from the acquisition.”
PointsBet Sportsbook says its board will now assess DraftKings’ proposal. The group did not set a date as to when a decision would be reached. It is important to note that no binding deal is in place, yet.
Unfortunately for Fanatics, DraftKings’ bid came before both Fanatics and PointsBet shareholders and the Illinois Gaming Board could approve the deal.
DraftKings already the top Illinois sportsbook in lifetime handle
DraftKings is the #1 Illinois sportsbook for total lifetime bets. More than $6.8 billion has been wagered through DraftKings Illinois. That amounts to a market share of 33.2%. FanDuel has 27.3% of the market thanks to wagering of nearly $5.6 billion.
In terms of lifetime revenue, FanDuel is the top book and DK is second. FanDuel Illinois has lifetime revenue of more than $600 million, for a 37.3% share of the market. DraftKings has a 26% share for its revenue of nearly $420 million.
Buying PointBet’s business would instantly have made Fanatics the fourth-biggest Illinois sportsbook operator in the country’s second-most lucrative sports betting market.
PlayIllinois data shows that 7.5% of the lifetime sports bets in Illinois have been placed through PointsBet through March. That ranks fourth behind DraftKings, FanDuel and BetRivers.
Fanatics CEO: “Seems like a desperate move.”
The sportsbook wars are underway. As the legal sports betting industry moves from the crazy-money expansion phase to the careful-cash consolidation phase, this move from DraftKings Sportsbook appears to be a strategic one. It looks like the top-tier operator is trying to keep an aspiring sportsbook from becoming a major competitor.
If this new deal moves forward, it will be a major blow to Fanatics’ sports betting efforts. The company was looking to expand its reach ahead of the NFL season. The deal with Fanatics would have given the company access to at least 15 states where PointsBet already operates, including Illinois.
Fanatics CEO Michael Rubin said he’s highly suspicious of the deal. He said he thinks DraftKings is just trying to throw a wrench in Fanatics’ momentum.
“We are skeptical of the DraftKings proposal which seems like a desperate move to slow down Fanatics and PointsBet from completing the deal,” said Rubin.
Rubin said DraftKings would allocate significant cash “just to try to block us.” He estimated that DraftKings could assume as much as $500 million in costs to close the deal.
“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.”
There are still some hurdles for DraftKings to clear. The deal, if accepted, needs to be approved by the PointsBet board. There also could be regulatory issues, given DraftKings’ dominance of the US market, along with FanDuel.