PointsBet has entered into a binding agreement with Fanatics Betting and Gaming (FBG) for the sale of its US business.
The likelihood of a sale was reported last week (11 May) by iGaming NEXT as rumours persisted around advanced acquisition talks between the two businesses.
Terms of the acquisition
PointsBet shareholders will now be invited to vote on the proposed transaction, which will take place on a debt free, cash free basis for a headline cash consideration of $150m, at a shareholder meeting in late June.
FBG will pay $100m to PointsBet upon initial completion of the deal, with a further $50m to be paid at subsequent completion.
In addition to the acquisition, PointsBet will provide services to FBG prior to the final closing of the deal, and will be reimbursed by FBG for those services.
Net proceeds of the sale, together with the majority of PointsBet’s corporate cash reserves, are expected to be distributed among shareholders. The firm’s board estimates the deal to deliver between A$1.07 and A$1.10 per share to shareholders.
Following the transaction, PointsBet will retain its Australian and Canadian businesses, as well as ownership of its proprietary sports betting, racing and iGaming platform and a perpetual, royalty-free licence to exploit its previously acquired Banach Technology assets, which will be sold to FBG under the deal.
A previously agreed deal between PointsBet and NBCUniversal, which saw the operator obliged to spend around $58m per year on advertising with the broadcaster, will be transferred in full to FBG as part of the transaction.
PointsBet’s final payment to NBCUniversal is included within a funding requirement capped at $21m between approval of the sale by shareholders and the final completion of the transaction.
Rationale behind the deal
PointsBet said it intended to alleviate the demands on its balance sheet by offloading its US business.
Having already considered and implemented a number of initiatives aimed at reducing the cash requirements of its US operations, the company’s corporate cash balance is still insufficient to fund the US business through to profitability, it said.
As a result, without putting the assets up for sale, PointsBet would have needed to raise additional capital in the near term, during a period of “challenging” market conditions.
Any equity capital raised by the company would therefore need to be raised at a substantial discount to recent market prices, the firm said, while there could be no guarantee that additional capital could be raised at all in the near term.
The proposed transaction therefore addresses a key uncertainty for PointsBet by removing the need to raise capital in order to fund the US business to the point of becoming cash flow positive.
After completing the sale, PointsBet said it expects its remaining Australian and Canadian business to be at or around EBITDA breakeven on a standalone basis.
Management commentary
“In view of the US market in which the company has significant operations, the board has explored and considered a wide range of strategic alternatives over an extended period of time,” said PointsBet chairman Brett Paton.
“Having considered all of the options potentially available to the company, the board believes the Fanatics Betting and Gaming proposal optimises value for shareholders.
“The acquisition by Fanatics Betting and Gaming of our US business will enable PointsBet to return significant capital to shareholders, while retaining strong Australian and Canadian businesses supported by our leading proprietary technology in a capital-light setting,” Paton concluded.
PointsBet CEO Sam Swannell added that in the US, “the costs of operating in a state-by-state environment, together with the requirement to build significant scale to compete against well capitalised operators, led us to explore a number of options.
“Fanatics Betting and Gaming has recognised our strategy, technology and team, as a platform for their own expansion in the online sports betting and iGaming market.
“Given Fanatics’ significant presence in the US sports market, we consider them to be a natural acquirer of our US business.”
Swannell concluded that the proposed transaction removes the risks and capital requirements associated with executing PointsBet’s US strategy.
The deal was poorly received by PointsBet shareholders. The announcement triggered a more than 20% decline in the ASX-listed operator’s share price.
Fanatics Betting & Gaming has strengthened its C-level suite with the hire of former DoorDash executive Hank Couture as COO.
Couture arrives at Fanatics as the first ever chief operating officer (COO) of the company’s growing Betting & Gaming division.
Couture brings experience from DoorDash, where he was previously VP of US marketplace for the food delivery and takeout disruptor.
Spending seven years at DoorDash, Couture started as the general manager of Chicago before being promoted to director of US marketplace in 2018 and eventually VP.
In his early career, Couture worked in equity derivatives structuring for Goldman Sachs.
Joining a strong senior management team at Fanatics Betting & Gaming, Couture will report to CEO Matt King, the former chief executive of FanDuel.
“Hank’s experience in building one of the largest marketplaces in the US is exactly the type of person we are looking for at Fanatics Betting & Gaming,” said King.
Fanatics Betting & Gaming CEO Matt King: “Hank’s experience in building one of the largest marketplaces in the US is exactly the type of person we are looking for at Fanatics.”
“As our new COO, Hank’s impressive track record of success will provide us with valuable insight as we build a sportsbook that is easy to use, trustworthy, and more rewarding for sports fans,” King added.
Fanatics has made a series of high-profile hires over the last 12 months, as it looks to build out its online gambling division and target the US sports betting market.
Former Goldman Sachs banker Andrea Ellis joined as CFO in October 2022, while ex-MTV marketing chief Jason White was recruited as CMO just one month later.
Sports merchandising giant Fanatics is widely expected to shake up the US OSB hierarchy in the mid- to long-term, due to its competent and proven senior team and strong balance sheet.
However, the operator has been modest in its strategic approach to date, taking a long time to decide on a technology partner before launching officially in January of this year with a retail sportsbook at FedEx Field in Maryland, home of the NFL’s Washington Commanders.
The brand is preparing to go nationwide in mid-2023.
Fanatics – which is aspiring to become a $100bn company under group CEO and founder Michael Rubin – raised $700m in its latest funding round.
Fanatics Betting & Gaming has hired former Sky Betting & Gaming (SBG) head of commercial planning Mike White as its new VP of commercial.
White leaves his role with Sky having joined the UK-based operator in 2014 as a football trader, before several promotions saw him become head of trading in 2019, and then head of commercial planning in January 2021.
Prior to his time at Sky, White was a betting broker and trader for the now Flutter-owned betting exchange, Betfair.
iGaming NEXT understands that White will split his time between Leeds in the UK and New York City in the US in his new role with Fanatics.
White joins a roster of top-tier betting and trading talent to recently join the sports merchandise behemoth.
The business revealed in October that it intends to launch sports betting operations in the US from January 2023, and expects to be live in between 15 and 20 states by the beginning of the 2023 NFL season.
“We’ll be in every major state other than New York, where you can’t make money,” said Fanatics CEO Michael Rubin.
In order to fulfil its ambitions (Rubin has also said he wants Fanatics to become the number one business globally for online sports betting and iGaming), the firm has taken on a slew of high-profile executive hires from both inside and outside of the gambling industry.
In his new role, White will be reunited with former SBG colleague Andy Wright, who was headhunted as Fanatics SVP of trading in May this year.
In addition, Fanatics’ Betting & Gaming business segment is managed by former FanDuel CEO Matt King.
Other significant appointments in recent months include former MTV marketing chief Jason White as CMO and former Goldman Sachs banker Andrea Ellis as CFO.
Award-winning marketer Jason White has been appointed as chief marketing officer of Fanatics’ online gambling division, Fanatics Betting & Gaming (FBG).
White boasts an impressive history of successful marketing jobs across a number of different industries.
He served as CMO of Paramount-owned MTV Entertainment between April 2021 and June 2022 after spending several years as CMO of cannabis companies Cura Cannabis Solutions and Curaleaf.
Prior to those roles, at advertising agency Wieden + Kennedy, White was instrumental in establishing the Nike brand in China, as well as developing marketing campaigns for world-leading US sports stars Kobe Bryant and Tiger Woods.
White was also global head of marketing for hip hop star Dr. Dre’s Beats by Dre audio company, which was sold to Apple in 2014 for $3bn.
White is a graduate of The McDonough School of Business at Georgetown University and began his career with Saatchi & Saatchi in New York City.
Jason White: “Fanatics’ vision for the future of sports fandom is incredibly special, and under Matt King’s leadership, I believe Fanatics Betting & Gaming is the next great disruptor.”
He is a member of the American Advertising Federation’s Hall of Achievement, has been named on both the Forbes “CMO Next” and Ebony “Top 100” lists, and is an eight-time Cannes Lion Award recipient for his “Straight Outta” campaign for Beats by Dre.
“Jason has a proven track record of helping to build globally recognised brands who are disruptors in their categories, and we’re thrilled to have him join Fanatics Betting & Gaming as we ramp up to our official launch,” said Matt King, CEO of FBG.
“As this competitive space continues to evolve, Jason will be invaluable to our long-term strategy of creating a dynamic and innovative product offering for all sports fans.”
White added: “I’ve spent a large part of my career working at moments of cultural disruption, from Beijing 2008 to the legalisation of cannabis and the rise of Beats by Dre, and I believe legal sports betting is the next cultural touchpoint that is ripe for transformation.”
“Fanatics’ vision for the future of sports fandom is incredibly special, and under Matt King’s leadership, I believe Fanatics Betting & Gaming is the next great disruptor.”
White will be instrumental in helping Fanatics continue to make its way into the online sports betting and iGaming industry in North America, as part of an all-star team led by ex-FanDuel CEO King and former Sky Betting & Gaming executive Andy Wright, who joined the firm as SVP of trading in May.
Fanatics is yet to take a real-money sports wager in the US but the sports merchandising giant has huge ambitions in the space and many believe it has the resources to become a market leader in the future alongside FanDuel, DraftKings and Caesars.