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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.
Fanatics in May 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 that 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.”
Rubin estimated that between the offer price of $195 million, a preexisting financial commitment to NBC upward of $250 million, and losses and liabilities at PointsBet, DraftKings could assume as much as $500 million in costs just to close the deal.
According to Rubin, DraftKings would be allocating significant cash “just to try to block us.”
DraftKings’ Robins declined to comment on those specific numbers but acknowledged Fanatics would have a head start on assessing costs through its own purchase process. A person close to the company said some of those expected costs could be spread out annually and said DraftKings still expects a return on the deal despite anticipated additional spending.
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 that “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.
Disclosure: NBCUniversal is the parent company of NBC and CNBC.