Fanatics recently entered the sports betting market by opening a Fanatics Sportsbook at Maryland’s FedEx Field, home of the Washington Commanders, earlier this year.
Shareholders will receive between 71 and 73 cents per share, which is significantly lower than the peak price of $12.69 per share the company reached in February 2021. However, the payout is still higher than the lowest trading day in PointsBet’s history at 97 cents per share on March 15, 2020.
“Fanatics and PointsBet are excited to enter into an agreement for Fanatics Betting and Gaming to acquire PointsBet’s U.S. business,” a joint statement released by the two companies reads.
“While there are still several steps in the process to complete the acquisition, both parties are confident in the outcome.”
In the coming weeks, Fanatics Betting and Gaming will launch its mobile betting app in Maryland and Massachusetts after starting the test earlier this month.
PointsBet’s financial challenges
According to the release, PointsBet is the seventh-largest online sports betting operator in the U.S and has one of the smallest market shares among its competitors. Due to limited marketing budgets, it struggled to compete with bigger sportsbooks such as FanDuel, DraftKings and BetMGM.
The release also mentioned “the structurally high cost of operating in a state-by-state regulated environment and the requirement to pay partner fees in most U.S. States” as other reasons for the acquisition.
A shareholder vote for the acquisition of PointsBet’s U.S. assets by Fanatics is scheduled for late June. The $150 million deal only involves PointsBet’s U.S. operations, while its Australian and Canadian businesses will remain with PointsBet.
Fanatics also plans to fund some of the remaining cash flow burns from PointsBet.
PointsBet expects a loss of between $77 million and $82 million for the second half of 2023 and may need to raise additional capital at a significant discount to recent market prices if the deal with Fanatics falls through.
NBCUniversal, which previously held an equity stake in PointsBet, will receive proceeds from the deal and no longer hold any equity stake.
Fanatics to enter New York sports betting market
Fanatics’ acquisition of PointsBet enables the company to enter the largest sports betting market, New York, which had no licenses available at the time of the deal. Although the state’s tax policies against sportsbooks are not very accommodating, with the government taking 51 percent of all profits, it is still a crucial acquisition for Fanatics since it is the No. 1 state in handle and wealth.
The deal also allows Fanatics to enter the No. 2 market, New Jersey, and other top markets like Pennsylvania and Illinois.
Through PointsBet, Fanatics also gains access to Michigan, which allows iGaming marketplaces such as table games and slot machines. In this state, iGaming has higher margins than sports betting.
Fanatics believes its large mailing list of 95 million individuals will help it gain traction in the highly competitive sports betting market. The company hopes this advantage will help it close the gap with industry leaders such as DraftKings and FanDuel.
It has set up a promotional system where users can receive back every dollar wagered on straight bets, three percent for parlays, and five percent for same-game parlays and is a similar system to those of DraftKings and Caesars.