Fans have struck an deal with PointsBet US , for $150m cash. They are looking to make a big splash on the US Sports Betting market.
Fanatics, subject to PointsBet shareholders’ approval, will purchase the Australian group’s US sports betting, igaming and Banach tech operations as well as a license to utilize the proprietary technology of the firm for $150m. This does not indicate what it will mean to Fanatics’ agreement with Amelco for the use of its sportsbook technology.
In a joint statement , read “Fanatics and PointsBet were excited to enter an agreement for Fanatics Betting and Gaming’s acquisition of PointsBet US business.”
Both parties are confident that the deal will be completed, even though there are several steps left to take. In the next few weeks, Fanatics Betting and Gaming and PointsBet plan to provide more details about the proposed deal and update the public on the progress.
SBC Americas was told by sources at SBC Summit North America that a deal would be announced soon. However, things have been moving quickly since the conference.
Fanatics gains access to the market as PointsBet is absorbed by it
The agreement was announced just days after SBC Americas met with Fanatics Betting & Gaming’s CEO Matt King to discuss market access.
King didn’t reveal anything about the PointsBet agreement, but he did say that the group has “access everywhere”. In his Wednesday keynote speech with Eben Novy Williams, King said that the market access in the US was “pretty poor”.
He said SBC Americas, “We have access to all states, except for Connecticut and other states that have a very limited access.” We have access 90 percent plus of the market.
PointsBet is available in 14 US States, covering 35% adult population. This is in line with Fanatics’ prediction that they would be live in 12-15 US States by the start the NFL season.
The Australian group also experienced significant growth in the US despite not being profitable and having a problem with cash. US revenue growth was 103% for the year ended Q3, and igaming grew by 115%.
Fanatics has been beta-testing in Tennessee, Ohio and one retail sportsbook at the FedEx Field. However, the company now wants to reach out to the major players in the US such as FanDueland DraftKings.
King said in his keynote speech last week that Fanatics had a database of over 95 million people. This is 12 times bigger than the database King had available at FanDuel when he was there back in 2018.
PointsBet takes advantage of the US market momentum, as cash is running out
PointsBet has agreed to continue funding the US unit up to a maximum of $21m, including fees for the NBCUniversal partnership.
Once the Fanatics acquisition is completed, the NBCUniversal contract, which has been extended until 2027, and costs around $50m annually, will be transferred.
PointsBet stated that, in part the deal was driven by the weaker balance sheets in the US. The unit is “not expected be cash flow positive within the near-term”. PointsBet US’s most recent accounts showed that the company had enough cash to last for around a year. With a costly NBC agreement, they decided to sell.
In a statement, it was stated that PointsBet’s cash balance would not be able to sustain the US unit’s profitability. A sale of the US unit was therefore in the best interests of the shareholders.
CEO Sam Swanell said to investors: “Despite our strategic success in building a valuable US asset, the cost of operating in state-by-state environments, along with the requirement to create significant scale in order to compete against operators who are well-capitalized, led us explore a variety of options.
The sale of the US Business is the best risk-adjusted outcome for the shareholders, compared with the benefits and risks of other options. This includes the status quo.
Fanatics Betting and Gaming recognized our team, technology and strategy as a platform to expand their business in the online sports betting and gaming market.
PointsBet, despite this sale will continue to be present in North America. Its operations will remain in Canada. The group boasts 28k active users within Ontario, and noted that there are still many opportunities in North America.
Pointsbet expects to break even on EBITDA after selling the US division. Australian gains will offset Canadian losses, as investments continue in scaling up.
Swanell said: “I’d like to thank Fanatics Betting and Gaming CEO Matt King and the team for the substantial amount of constructive due diligence that was done in order to bring about this proposed acquisition.”
The deal is also a sign of further consolidation on the US sports betting industry, as smaller operators struggle to compete against the big players.
PointsBet’s Brett Paton told investors that the acquisition of their US business by Fanatics Betting and Gaming will allow them to return significant capital while maintaining strong Australian and Canadian operations supported by our proprietary technology.
