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Posted on: June 18, 2023, 09:32h.
Last updated on: June 18, 2023, 09:32h.
PointsBet (OTC: PBTHF) announced today that its board of directors evaluated a $195 million all-cash bid for its US business submitted last Friday by DraftKings (NASDAQ: DKNG) and that it plans to engage in discussions with the suitor.
Perhaps in an effort to ensure it’s not left empty-handed, the Australian gaming company advised investors to vote in favor of the $150 million acquisition proposal for its US unit submitted last month by Fanatics Betting & Gaming (FBG).
The Board continues to recommend that Shareholders vote in favour of the FBG Transaction at the Extraordinary General Meeting scheduled for Friday, 30 June 2023, while it considers the DraftKings Proposal,” according to a PointsBet statement.
DraftKings revealed a competing bid to the Fanatcis offer nine days after eight of the 10 biggest institutional holders of PointsBet equity voted in favor of the FBG offer. Combined, those investors own 44.58% of PointsBet’s shares outstanding.
DraftKings on the Clock
Some sports wagering analysts and industry observers speculated that DraftKings may be looking to play the role of spoiler or thorn in the side of Fanatics. For its part, the original PointsBet US suitor claimed DraftKings is merely looking to block the transaction.
“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,” wrote PointsBet Chairman Brett Paton in a letter to DraftKings CEO Jason Robins.
So while DraftKings’ offer is superior to Fanatics’ on paper — a point acknowledged by PointsBet — the new suitor needs to prove its commitment to the Australian firm and that likely needs to happen prior to June 30.
“As previously advised, it should be noted that 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,” according to the statement.
Previously, PointsBet warned investors that if wasn’t successful in reaching an agreement to sell its US sports wagering operations, it’d likely be forced to sell equity at unfavorable prices, diluting current investors in the process.
DraftKings Offer Is Strong
On paper, DraftKings’ offer for PointsBet US bests Fanatics’ bid by 30%. Alone, that’s a source of strength and one that gives the target’s board something to think about.
Boston-based DraftKings, which had just $1.25 billion in debt at the end of the first quarter, noted it doesn’t need to finance the transaction. It also believes it can complete the deal more rapidly than Fanatics can. The new suitor also be believe it can obtain state regulatory approval for the purchase more rapidly than Fanatics because it already operates in many of the states in which PointsBet US does business.
It is possible DraftKings could further speed things along by presenting the target with a plan for dealing with financial losses in the US.
“Additionally, as discussed with you verbally, the Board requires a written confirmation, as soon as practicable, of DraftKings’ position on funding the cash burn of the US Business (noting that the FBG Transaction caps PointsBet’s cash burn at US$21m from 1 July 2023),” added Paton.
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