Australian sports betting powerhouse PointsBet
(ASX:PBH) has increased by nearly 20 per cent to its highest level in a month after announcing to the market that they are set to engage in talks with DraftKings, in hopes of securing a higher offer price for its US business.
DraftKings has made an unsolicited all-cash offer of $195 million ($283 million), coinciding with PointsBet shareholders' imminent vote on a sale to sports apparel and fan products business, Fanatics.
The news of DraftKings' offer has led to a surge in PointsBet's shares, which traded 13.2% higher at $1.54 in morning deals. However, it is important to note that DraftKings' proposal is not a binding offer or commitment, as clarified by PointsBet in a letter to shareholders. There is no guarantee that the proposal will result in a definitive agreement.
PointsBet will consider various factors in evaluating DraftKings' proposal, including its timeliness, certainty, and the potential amount and timing of capital return to shareholders. The initial offer from DraftKings was presented on June 16, prompting PointsBet to explore whether it can be completed in a timely and certain manner while maximising shareholder value.
The Fanatics deal, valued at $150 million ($222 million), is still supported by PointsBet's board. If the transaction with Fanatics is approved by shareholders, PointsBet intends to distribute approximately $1.07 to $1.10 per share to shareholders. This represents a significant portion of the net sale proceeds and the majority of the company's cash currently held on its balance sheet.
The process of selling PointsBet's US business has been a long journey. Initially, the company engaged in exclusive talks with Betr in late December of the previous year. However, Betr struggled to secure the necessary funding to meet PointsBet's rumoured asking price of $250 million. Consequently, PointsBet has continued to explore alternative options and potential buyers.
While a sale of the US business will leave PointsBet focusing on its operations in Australia and Canada, CEO Sam Swannell admitted there is still a chance that the Australian arm could be part of another transaction. The company remains confident in its growth prospects as a primarily locally-focused business, currently holding around a 5% market share in Australia.
As discussions with DraftKings unfold, shareholders will closely follow the developments, aiming to secure the best possible outcome for their investment. PointsBet is committed to making decisions that maximise shareholder value and position the company for continued growth and success in the highly competitive sports betting market.
