DraftKings Folds Bid for PointsBet US Assets

In a surprising turn of events, DraftKings Inc. announced on June 28 that it will no longer pursue the acquisition of the US business of PointsBet Holdings Ltd. DraftKings expressed its gratitude to PointsBet for their time and cooperation during the process.

DraftKings’ Failed Attempt to Acquire PointsBet Paves the Way for Fanatics

The collapse of DraftKings’ attempt to buy PointsBet has opened the door for another prominent player in the industry. Fanatics, a well-known sports merchandise retailer, is now set to become the new owner of PointsBet’s American arm. Fanatics had initially agreed to a deal worth approximately $150 million to acquire PointsBet. However, in response to DraftKings’ last-minute bid, the offer was increased to $225 million.

This is not the first time DraftKings has withdrawn from a major deal. In 2021, the company cancelled its proposed $22 billion acquisition of Entain, the owner of Ladbrokes, due to regulatory concerns. It seems that similar concerns may have played a role in the collapse of the PointsBet deal.

DraftKings’ bid, which was non-binding, required finalization from both parties. Although negotiations took place between PointsBet and DraftKings, they were unable to reach a binding agreement before the deadline expired. It appears that DraftKings’ motive behind the bid was to prevent a competitor with deep pockets, such as Fanatics, from entering its territory. However, rumors also circulated that the bid might have been fueled by personal motives stemming from failed merger negotiations between DraftKings CEO Jason Robins and Fanatics CEO Michael Rubin in 2021.

Fanatics Poised to Disrupt Sports Betting Market, Threatening DraftKings and FanDuel Dominance

Industry experts have speculated about the significance of Fanatics’ entry into the sports betting market. With substantial resources for product development and marketing, backed by a massive customer database, Fanatics is expected to pose a significant challenge to leading industry giants like DraftKings and FanDuel. Analysts believe that Fanatics could quickly capture a significant share of the market once its sportsbook launches before the 2023 NFL season.

PointsBet shareholders are scheduled to vote on June 30 to approve Fanatics’ bid. If approved, Fanatics will gain access to ready-made sports betting licenses in several key states, including New York, Michigan, and New Jersey. These states offer lucrative opportunities for growth due to their large markets and the potential for iGaming expansion. While Fanatics’ new offer of $225 million is relatively modest considering the company’s valuation of $31 billion, the real value lies in the acquisition of sports betting licenses in key states. Without acquiring existing licensees, Fanatics would have faced challenges entering the New York, Michigan, and New Jersey markets, which are among the largest in the country.