DraftKings makes $195 million offer for PointsBet, outbidding Fanatics

Sports gambling powerhouse DraftKings has made a $195 million, all-cash offer for PointsBet’s U.S. assets, it said on Friday, topping an earlier bid by Fanatics.

Last month Fanatics agreed to buy the Australian company’s U.S. operations for $150 million in an effort to boost its presence in sports gambling.

“While we continue to focus on operating more efficiently and driving substantial organic revenue growth in the United States, we will also look to prudently capitalize on compelling opportunities at attractive valuations, as is the case with PointsBet’s U.S. business,” said DraftKings CEO Jason Robins in a statement. “We believe DraftKings is uniquely positioned to submit this superior proposal due to our scale and corresponding ability to generate meaningful synergies from the acquisition.”

DraftKings, which is publicly traded, has a market cap of about $10 billion.

Robins told CNBC, while the deal wouldn’t be transformative for DraftKings, it would allow the company to grow market share.

“We do not expect this to have any impact on the path to profitability,” he added.

PointsBet is the seventh-largest sports betting operator in the U.S., but it’s rapidly been shedding cash. The company previously forecast a loss of between $77 million and $82 million for the second half of the year. 

If the deal moves forward, it would be a major blow to Fanatics’ sports betting efforts, as the company was looking to expand its reach ahead of the NFL season. The deal with Fanatics would have given the company access to at least 15 states where PointsBet already operates.

Fanatics CEO Michael Rubin told CNBC after the DraftKings announcement that he’s highly skeptical of the deal, which he views as DraftKings attempting to slow Fanatics down.

“It’s a move to delay our ability to enter the market,” Rubin said. “I guess they are more concerned about us than I would have thought.”

There are still some hurdles, though, for DraftKings. First, the deal has to be approved by the PointsBet board, which will review the new proposal and determine its next steps, according to the company.

The company said Friday, “subject to the outcome of the review being undertaken of the DraftKings Proposal, the Board continues to recommend that Shareholders vote in favour of the FBG (Fanatics Betting and Game) Transaction.”

And then there’s the potential for regulatory challenges: DraftKings and FanDuel dominate the U.S. sports betting market, which could make a deal to grab even more market share contentious.