One of America’s largest legal sports betting operators is looking to make an acquisition.
DraftKings has submitted an offer to acquire PointsBet’s U.S. business in a $195 million all-cash deal. The proposal by DraftKings comes after Australia-based PointsBet — the seventh-largest online sports betting operator in America — agreed to a deal with Fanatics to sell its U.S. assets for $150 million. DraftKings’ offer will now cause PointsBet to weigh its options regarding a sale.
Prior to DraftKings’ bid, New York gaming regulators had been reviewing Fanatics’ offer.
Promising venture
PointsBet presents a unique opportunity for both Fanatics and DraftKings. The Australian company has online betting sites in 14 states across the U.S., including Colorado, Illinois, Michigan, Ohio, Pennsylvania, and New York — the largest online betting market in America.
Fanatics, which launched wagering operations in January 2023, failed to obtain an online sports betting license in New York after submitting a joint bid with Penn National Gaming and Kambi.
On the other hand, DraftKings could expand its reach even further with the acquisition of PointsBet’s customers. The Boston-based company is also able to hinder Fanatics’ growth as a sportsbook with the purchase of PointsBet’s U.S. business in a competitive betting market.
PointsBet’s U.S. assets have shown signs of growth despite heavy marketing efforts. The company generated $120 million in revenue for the six months ending December 31, 2022, a 28% increase year-over-year. PointsBet reported a total sports betting handle of $2.2 billion in H1 FY2023, compared to $1.6 billion for the same period last year. Despite the uptick, PointsBet reported a net loss after tax of $110 million in H1 FY2023 — a 19% increase year-over-year.
Purchasing power
DraftKings’ offer to purchase PointsBet’s assets comes after encouraging results in Q1 2023. The sportsbook, which offers wagering in Ontario and 23 states in the U.S., generated $770 million in revenue during the quarter — an 84% increase year-over-year. DraftKings reported a monthly average of 2.8 million unique paying customers in Q1 2023, a 39% uptick compared to Q1 2022.
The company is still seeking profitability despite the encouraging results. DraftKings reported a net loss of $397.1 million in Q1 2023, compared to a loss of $467.6 million in Q1 2022. Total cash and cash equivalents reached $1.5 billion in Q1 2023, down from $2.2 billion in Q1 2022.
DraftKings’ potential purchase of PointsBet’s U.S. business adds to a growing list of activations the company is using to acquire more customers. In March, the company debuted DK Horse — a standalone horse racing app that is accessible in more than 10 states. The DraftKings has also launched DK Network — a video streaming service that aims to compete with FanDuel+.
Fanatics has a difficult task in competing with DraftKings’ offerings as PointsBet decides who to do business with. As the pending sale looms, other sportsbooks may submit offers of their own.
