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Fanatics to buy PointsBet's U.S. business for $150 million

Yahoo Finance Live discusses Fanatics acquisition of PointsBet's U.S. business for $150 million in an effort to expand its footprint within the sports gaming market.

Video Transcript

JULIE HYMAN: Speaking of another deal, Fanatics has agreed to buy sports betting company PointsBet's US business for about $150 million. The companies announcing the news in a joint statement on Sunday night. In they're writing, quote, "While there are still several steps in the process to complete the acquisition, both parties are confident in the outcome." Fanatics is going to gain access to at least 15 states that PointsBet currently operates in, expanding its reach. Shareholders will vote on the deal in late June.

Of course, Fanatics is a privately-held company. Michael Rubin heads up that. PointsBet trades in Australia.

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BRAD SMITH: Yeah. Look, I enjoy this deal and especially kind of looking at it--

JULIE HYMAN: You enjoy this deal?

BRAD SMITH: I enjoy this deal, yes. Blanket statement and I'm sticking to it. Taking a look at the DraftKings stock, though, here today and some of the other gaming companies that already have their own infrastructure, their own play, kind of going after the sports betting community that has seen much more of the licensed component come online and much more of the retail and kind of brick-and-mortar sportsbooks.

Fanatics, for the same right, has also done so, I believe, in Maryland is where we saw the first one come online recently this year. And so taking a look at DraftKings stock here separately, you're seeing that kind of move lower on this news. That's down by about half a percent. Penn Gaming, or Penn Entertainment still holding pretty solid right now. It's just about, well, flat. I guess it could have moved lower.

But then Caesars and MGM-- interesting there, and I zero in on those because of what we had already seen from Fanatics starting to get into some of those brick-and-mortar capacities. Now, of course, a lot of other components go into an MGM Resorts or Caesars Entertainment and the different parts of their business that they operate outside of just the sports gaming or the sports book.

But I think for PointsBet and for Fanatics, Fanatics has been able to not only generate these partnerships with pretty much every major sports league and association for merchandise and official retailing, they've gotten into memorabilia, now getting in to betting as well. I think it's just the next natural step before for them. And it was January 20 that they had officially opened their retail location in Maryland.

JULIE HYMAN: Yeah, this is something that they've been looking at, that Michael Rubin's been looking at for a little while here and figuring out how to get into this market. I mean, DraftKings and FanDuel really dominate the online sports betting market as it is in the US. And there is a lot of competition between them, right?

That said, PointsBet has 95 million customers in the US. So that's what Fanatics is gaining through this deal. It's interesting. There was an interesting note out from Bloomberg Intelligence that said the valuation of this PointsBet US Sportsbook at 1.7 times 2022 sales-- they say that implies a valuation about half that of DraftKings' enterprise value to consensus sales, which, in other words, is a discount.

BRAD SMITH: Yeah.

JULIE HYMAN: And so what does that imply about how competitive this market is, how much value these various operations have? It maybe raises some questions going forward, but it doesn't seem to be raising enough questions to drive those stocks down--

BRAD SMITH: Yeah.

JULIE HYMAN: --in today's trading. So maybe they're not immediate questions. Maybe they're sort of longer-term questions, existential questions.

BRAD SMITH: The competitive landscape is getting more competitive.

Yes