PointsBet directors “prepared to engage” with DraftKings on $195m bid
Australia-headquartered operator scrutinizes superior proposal but confirms imposition of ‘hell or high water’ clause on potential completion
PointsBet’s directors have confirmed they will take into consideration DraftKings 11th hour $195m bid to acquire the firm’s US division, adding fuel to the emerging bidding war with Fanatics Betting & Gaming (FBG).
Releasing an update on the Australian Securities Exchange (ASX), the operator revealed it had engaged with lawyers over DraftKings’ non-binding indicative proposal, asserting its belief that this could, in time, lead to a superior proposal to the FBG bid.
FBG tabled a $150m offer for PointsBet USA in May, a proposal which looked set to come to fruition at a PointsBet general meeting on June 30, before DraftKings sent its own proposal to the firm on Friday (June 16).
While DraftKings’ proposal represents a premium of 30% on the FBG bid, many, including Fanatics CEO Michael Rubin, have questioned the rationale of the bid, with Rubin branding it an attempt to “block” Fanatics’ path to gaining a foothold in US sports betting.
In any event, PointsBet has said it is committed to the FBG deal, asserting that it is the preferred option having engaged with FBG previously over several months and gone through a full due diligence process.
In the ASX update, PointsBet published its return letter to DraftKings CEO Jason Robins, outlining the terms by which it would engage with the Boston-headquartered operator.
This includes the signing of a non-disclosure agreement as well as PointsBet expressing its strong preference that a so called ‘clean team’ protocol be enacted, due to DraftKings being in competition with PointsBet.
Clean team agreements (CTA) govern procedures that both parties must follow when sharing sensitive information. This allows the parties to plan for integration without the fear that competitive information or trade secrets will be revealed in the event the merger does not go through.
“Post the execution of the necessary agreements and protocols, the PointsBet management team and our advisers are ready to immediately provide access to a populated virtual data room and engage with your team and advisers to complete your due diligence in the required timeframe,” PointsBet stated.
“Additionally, as discussed with you verbally, the board requires a written confirmation, as soon as is practicable, of DraftKings’ position on funding the cash burn of the US business (noting that the FBG transaction caps PointsBet’s cash burn at US$21m from 1 July 2023),” the firm added.
The PointsBet letter seeks assurances from DraftKings that they will assume the risk of delay or denial of anti-trust approvals, with PointsBet holding the operator to a “hell or high water” standard with regard to anti-trust clearances.
This would oblige DraftKings to make any and all efforts to obtain anti-trust approvals, including possible divestiture of certain elements of its business where needed.
In the event that PointsBet elects not to proceed with the FBG bid, the firm is required to pay a $1.5m break payment to Fanatics as part of its obligations.
DraftKings shares have fallen by 4.20% since news of the bid was made public, trading at $24.66 per share in early trading on the NASDAQ stock exchange.