Sportsbetting company PointsBet Holdings (ASX: PBH) has faced a slew of disappointments in trying to sell its US business. Initially, it shut down Aussie wagering company Betr’s $220 million offer; then, it succumbed to only a slightly larger offer—$222 million—from Fanatics Betting and Gaming (FBG). Now, it is being offered $280.7 million in cash from competitor DraftKings, on a debt-free and cash-free basis with no financing condition. (It’s like winning, but at what cost?).
The PointsBet Board of Directors has been carefully evaluating the DraftKings Proposal and, in a sincere effort, concluded (following discussions with the company’s financial and legal experts) that the DraftKings Proposal has the potential to result in a more advantageous offer. Consequently, PointsBet, with the support of its financial and legal advisors, will commence discussions with DraftKings regarding the DraftKings Proposal.
On May 15, the Company agreed to sell its US business to Fanatics for $222 million. It decided to finally budge on the ‘$250 million they sought for nothing’ principle, and tabled to put the Fanatics deal to vote on June 30, 2023.
Seeking to disrupt the deal, the DraftKings proposal is a superior offer. Now, it is about figuring out whether this is a better offer for shareholders.
PointsBet Non-Executive Chairman Brett Paton has his concerns. He issued a caveat, saying, “Given DraftKings is a key competitor of PointsBet, it is our strong preference that DraftKings’ due diligence is conducted by a clean team. This will require agreement of a clean team protocol prior to the commencement of due diligence.”
What’s more, the Company is expecting people to react unfavourably to the deal. Paton added, “In light of the anticipated heightened scrutiny of an acquisition of PointsBet by DraftKings, as compared to the FBG Transaction, please provide written confirmation that DraftKings will assume the risk of delay and/or denial of antitrust approvals, as we intend to hold DraftKings to a “hell or high water” standard with respect to antitrust clearances.”
The DraftKings Proposal does not constitute a binding offer or commitment on the part of DraftKings to negotiate or execute a definitive agreement and, to this end, there is no guarantee that the DraftKings Proposal will result in a binding definitive agreement.
The Board recommends that shareholders vote in favour of the Fanatics Transaction at the Extraordinary General Meeting scheduled for Friday, 30 June 2023, while it considers the DraftKings Proposal.
When a competitor lends a hand, you can’t always be sure whether to shake it or slice it off. PointsBet must review the hand in question to make the right decision. That said, considering how much it has struggled thus far, it might be prudent to wash its own hands off of the US businesses and at a profit.
DraftKings has until Tuesday to submit a formal bid.
Alinda is a Business Reporter for The Sentiment
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