Fanatics made a bold gambit to expand its presence in the American mobile sports betting market by acquiring PointsBet’s U.S. assets and it has paid off after the company’s shareholders recently approved the sale, indicating that they see potential in the growing U.S. sports betting industry.
Move Over DraftKings
Before Fanatics arrived on the PointsBet radar, DraftKings was the leading contender to scoop up the Australian-based bookmaker’s U.S. assets. However, Fanatics arrived on the scene and increased its initial offer by 50 percent to $225 million and now they have an immediate presence in 14 markets that were not available to them before the sale.
According to reports, 99.16 percent of the shareholders approved the sale and Fanatics was understandably elated by their decision.
A Fanatics press release stated, “We are thrilled that the shareholders of PointsBet Holdings Inc. voted to approve our acquisition of the U.S. businesses of PointsBet. We moved decisively to close the deal and we look forward to working with our friends at PointsBet Holdings Inc. to finalize the remaining acquisition details.
“This is a pivotal moment for Fanatics Betting and Gaming that will accelerate our growth in the legal online sports betting, advance deposit wagering, and iGaming markets in the United States. Pending regulatory approvals in the various states in which PointsBet operates, we will have more details to share in the coming weeks on how the acquisition of PointsBet US businesses will bring to life our unique vision for Fanatics Betting and Gaming.”
“Once we decided to sell the U.S. business, we turned our attention to finding the right business partner,” PointsBet Chairman Brett Paton said. “Fanatics identified in PointsBet many of the attributes needed to be successful in entering the online market. In turn, Fanatics has a strong brand and an extensive sports customer base with a fanatical interest in sports.”
Losing Proposition
PointsBet entered a North American market that was foreign to its Aussie-based book of business but it couldn’t continue to function in an environment that was dominated by two major players that were unafraid to spend large sums of money to woo customers to their sites in the form of signup bonuses.
Paton commented on the challenges his company faced, “We doubt anyone expected FanDuel and DraftKings to become effectively a sports betting duopoly. It points to the huge incumbency benefits these companies have in the US market.
“However, we are one of the only international operators to have gained a worthwhile market share. There are over 60 online sports betting operators in the market. Only seven brands, including PointsBet, have a market share of more than 1%, with the remaining 53 companies competing for the rest.”
Balancing Strategic Success and Financial Viability
And while PointsBet did better than most in acquiring market share despite the seemingly unlimited resources of FanDuel and DraftKings, the decision to stay or exit the U.S. market came down to how long they could sustain losses before realizing gains.
The PointsBet chairman also talked about his company’s viability in the United States digital gaming market and said, “The short answer is that despite having some strategic success, the costs of competing against the largest companies of their type in the world meant the business would not be cash flow-positive in the near term. Continuing to operate the US business would require significant capital and further capital raises.
“… our ability to get to scale and operate at sustainable scale was challenged. We have been competing in a very high-cost operating market with the overlay of capital pressures to continue funding the business through to profitability.”
PointsBet will maintain its book business in Australia, India, and Ontario, Canada after the sale.
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