Failed merger negotiations may be behind DraftKings’ last-minute bid to acquire PointsBet USA and derail an already negotiated deal with Fanatics, according to a media report.
Block Fanatics from New York Entry
DraftKings chief executive officer Jason Robins is determined to “level the score” with Fanatics boss Michael Rubin, still holding a grudge after Rubin walked away from an advanced $48 billion merger negotiations in 2021, The New York Post claims based on unnamed sources.
DraftKings submitted a $195 million last-minute bid to acquire PointsBet USA, derailing the $150 million deal reached a month earlier with Fanatics, as well as Rubin’s ambition to establish Fanatics as a major player in the sports betting space.
“DraftKings already has scale,” claims one of the media sources, explaining that the rationale behind outbidding Fanatics is to block Fanatics from acquiring PointsBet’s online sports betting license in New York.
“If you want to be a player you have to be here,” the source added in terms of market presence in New York as “it is the largest state [with legal sports betting at the moment as] California, Florida and Texas are not offering sports betting.”
Australian-based PointsBet holds one of nine online sports betting licenses in New York and the state has no plans to increase the number of available licenses any time soon.
Speaking to CNBC earlier this month, Rubin said that DraftKings’ bid was more about derailing Fanatics’ bid and delaying its “ability to enter the market,” rather than improving DraftKings’ market position and size, showing that DraftKings is seriously concerned with Fanatics as a potential competitor.
As the operator with the second-largest market share nationwide, DraftKings has no other competitor even close to its 29% market share, and PointsBet’s US assets would not help it significantly cut the distance with the leader, FanDuel with 45%.
No Personal Motives Behind the Bid
Representatives from Fanatics declined to comment on the story when asked by the reporting media, while a DraftKings spokesman dismissed claims that there are any other motives besides the potential for “significant synergies and financial rationale,” as well as “interesting product and technology capabilities.”
To suggest that there is an ulterior motive that is personal and not business related is irresponsible and not grounded in reality.
DraftKings spokesperson
Acquiring PointsBet USA would be of significant importance to Fanatics as it would open up cross-market opportunities for its customer base buying official sports team gear, on top of the access to the market in New York, while for DraftKings the acquisition brings potential risks.
PointsBet is reportedly looking into the proposal and will likely force a “hell or high water” merger agreement, meaning a deal with or without regulatory approvals, while the proposal tabled by DraftKings is subject to acquiring regulatory approvals.
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