DraftKings’ surprise bid to swipe PointsBet US away from Fanatics has sent shockwaves through the sports betting industry.
The biggest impact could be felt in Colorado.
PointsBet US operates a business hub in Denver with 250 local employees, according to builtincolorado.com. With DraftKings’ $195 million offer for PointsBet trumping the Fanatics’ offer of $150 million, PointsBet employees in Colorado are facing an uncertain future.
DraftKings could simply rebrand all existing PointsBet services under the DK umbrella. Or it could eliminate redundant staff. Or it could seek to double down on the hot Colorado market and sink more resources into the area.
DraftKings says its offer is a ‘superior proposal’
PontsBet is one of 25 current Colorado online sports betting operators. It partnered with the University of Colorado in 2020, the first deal between a sportsbook and a college. The deal, however, went sour over continued pushback from students, parents, and alumni. The school recently ended its contract with PointsBet with two years remaining on the deal.
The DraftKings letter to PointsBet US officials praises the Australia-founded company’s innovative approach to sports betting. It also says a deal would necessitate streamlining operations between the two entities.
PointsBet has requested that DraftKings send over a formal deal by June 27. The company had scheduled a June 30 vote on the deal with Fanatics.
The letter to PointsBet Non-Executive Chairman Brett Paton offered to acquire PointsBet US’s stake through an all-cash transaction of $195 million. It hailed its offer as a “superior proposal” compared to the offer from Fanatics.
Jason Robins, DraftKings’ chief executive officer, and co-founder, explained the offer in a press release.
“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 US business. 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.
DK praised PointsBet US’s product capabilities, including the innovative “pointsbetting” service whereby betters can win/lose more money based on the final score of games.
Fanatics could be on the outside looking in
If PointsBet accepts the DraftKings deal, it leaves the young Fanatics Sportsbook scrambling. The Fanatics deal made perfect sense for Colorado and PointsBet.
Kroenke Sports and Entertainment (KSE) owns Ball Arena and the two teams that play their home games there: the Colorado Avalanche of the NHL and the 2023 NBA Champion Denver Nuggets. KSE also owns a professional lacrosse team, the Colorado Mammoth, and local media outlets.
Fanatics is one of the largest apparel companies in the world, valued at over $31 billion. It’s seeking to parlay its name recognition and also brand strength into the sports betting industry. Taking over PointsBet US was a step in that direction.
PointsBet operates a legal online sportsbook in 14 states. Fanatics has services available in Massachusetts, Ohio, and Tennessee.
DraftKings is one of the biggest online sports betting providers in the U.S. Its headquarters is in Boston. It has sports betting operator licenses in 23 states and Ontario. It also offers daily fantasy sports in 44 states.
Purchase could position DraftKings well in the West
DraftKings could be seeking to make Denver its own West Coast hub for future activities. While sports betting has taken off across the country, providing revenue for local governments, the final frontier is out West.
California and Texas are two untapped sports betting markets, with each state facing its own logistical and political hurdles before sports betting can be approved. Geographically, setting up a base in Colorado makes a lot of sense for DraftKings to be able to tap into those future markets. It could also advertise the convenience for residents of those states to come, visit and play in Colorado.
Unfortunately, any time there is a potential acquisition like this, there are usually cutbacks on staff of some kind. If DraftKings acquires PointsBet US, then it could streamline certain offerings like customer service and management roles.
Colorado remains a thriving sports betting market, one that will play a key role in the industry moving forward for the rest of the decade. With this offer, DraftKings obviously wants to call the shots.