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ASX-listed PointsBet has officially sold its US division to merchandise giant Fanatics after shareholders endorsed the $333 million sale on Friday following a lengthy bidding process.
More than 98 per cent of those who voted were in favour of the sale. It means betting operator PointsBet will retain control of its Australian and Canadian divisions and be freed of the expensive costs associated with its US expansion. Chairman Brett Paton said the soon-to-be cash-flow positive PointsBet is well-placed to capitalise on potential local acquisition opportunities, but hedged it’s unlikely to be a focus in the immediate future.
PointsBet chief executive Sam Swanell will be able to concentrate on the Australian and Canadian business after the sale of the US division.Credit: Chris Hopkins
“We do see opportunities in the form of junior operators who may come to us in time and suggest that we can find merit in a proposal. But in the meantime, we just want shareholders to see we’ve settled down and returned capital. We’ll hit the pause button for a little while,” Paton said.
The shareholders were asked to approve the $333 million sale after a drawn-out bidding process that culminated with Fanatics improving its offer by 50 per cent after an 11th-hour bid from US wagering behemoth DraftKings. DraftKings was unable to finalise its bid within the nine-day timeline set by PointsBet.
PointsBet said it intended to distribute between $1.39 and $1.44 a share to shareholders over two tranches; $1 per share to be paid in September following the first amount received from Fanatics, and the second after the final close.
Paton addressed shareholders before the vote on Friday and said PointsBet’s US outfit would not become cash positive in the near future and the board endorsed the Fanatics takeover.
“Continuing to operate the US business would require significant capital and further capital raises. This transaction addresses that uncertainty … The capital requirements are designed to buffer the balance sheet so we have very low to no prospect of ever having to come back to shareholders.”
PointsBet’s share price has increased by more than 30 per cent since the Fanatics offer was announced last month and opened at $1.74 on Friday. Although a significant improvement on recent times, the current price is dwarfed by its all-time high of $18.13 in 2021.
Paton acknowledged shareholder disappointment over the poor share price performance since it began pouring money into US expansion in 2021. He also acknowledged the group was selling the US outfit at a loss.
“Let me say on behalf of your board that we understand your disappointment about the share price performance of our company. As shareholders ourselves, both [PointsBet chief] Sam [Swanell] and I understand the deep concern and frustration that this has caused you,” Paton said.
Fanatics won an 11th hour battle for PointsBet’s US operations by upping its bid by more than $100 million. A number of analysts said the DraftKings bid was launched to block the Jay-Z-backed rival from entering the competitive US betting market. Through the deal, Fanatics gains access to PointsBet’s wagering technology and 14 critical gambling licences in key US states.
Rapper Jay-Z purchased a share of Fanatics in 2022.Credit: Paul Rovere
PointsBet chief Sam Swanell said the acquisition was well-timed now the local regulatory environment was set to change after 31 recommendations raised by the House of Representatives standing committee on social policy and legal affairs after the recent online gambling harm inquiry.
One of the major potential outcomes the Albanese government will now consider after the inquiry report is whether to ban all forms of gambling advertising within three years. Swanell said he looked forward to working with the government and other stakeholders affected by a potential ban to come to an arrangement together. A comprehensive ads ban could be damaging for PointsBet, known for its heavy marketing spend and brand ambassador Shaquille O’Neal.
“We believe as a net-net, we would welcome standards being adhered to at the level at which we operate, and that our established place in the market from a brand perspective that it won’t inhibit our growth going forward,” he said.
Swanell then said it was worth pointing out that PointsBet pays about 50 per cent of each dollar won from a client to the government in some form.
“The racing industry has come under some pressure from turnover because there’s pretty much been non-stop increases in these fees and taxes. I think there’s a broad recognition that we’ve reached the peak levels of tax in Australia, unless you want to kill it [the wagering industry]. That has consequences for the racing industry, sporting bodies, media companies” Swanell said.
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