PointsBet could sell Australian arm after sale of US business to Fanatics for $222m

A $222m sale of the US business to Fanatics will bring a large cash return to shareholders and marks the end of its ambitious US expansion.

PointsBet CEO Sam Swannell says the business would be “obligated” to consider any offers for its Australian arm

PointsBet’s Australian arm remains in play after the wagering confirmed the sale of its US operations in a $US150m ($222m) deal that will see much of the proceeds returned to shareholders.

US sports merchandise giant Fanatics was confirmed on Monday morning as the buyer of PointsBet’s US arm, as foreshadowed by The Australian on Sunday, in a transaction that will see PointsBet’s ASX-listed company left with operations in Australia and Canada.

PointsBet said if the proposed transaction is completed that it intends to distribute about $1.07 to $1.10 per share to shareholders, which represents most of the net sale proceeds and the majority of the cash currently sitting on its cash balance sheet.

The move comes after at least four months of discussions with the Matthew Tripp-led Betr for a deal to sell it PointsBet’s Australian business were recently terminated.

PointsBet had entered into exclusive talks with Betr just before Christmas last but Betr had been unable to raise the funding for PointsBet’s rumoured $250m asking price.

PointsBet chief executive Sam Swannell told The Australian that the company was confident of its growth prospects as a mainly locally-focused business, but admitted there was still a chance its Australian arm could be part of another transaction.

“We have said we have been in discussions with other parties in Australia and we still continue to talk to potential buyers, and if there was any opportunity for a deal that was of strategic value to our shareholders we would be obligated to consider that,” Mr Swannell said.

“We now know that our Australian operations are pretty valuable and we think we are … just starting to hit our straps here. We are able to have an extra focus on the business here and are excited about the potential. But yes the bottom line is you can never rule out any strategic proposals we may receive.”

Mr Swannell said PointsBet now had market share of about 5 per cent in Australia, and that the business was breaking even on an earnings before interest and tax, depreciation and amortisation basis despite rising point of consumption taxes and softening consumer spending hitting the overall gambling industry.

“We think we will be profitable by 2025 and plan to keep growing.”

Potential suitors for PointsBet in Australia include Japanese brand Bet, Tabcorp and Entain Group, the owner of the Ladbrokes and Neds brands, while Betr is for sale with a $100m price tag. Some betting industry sources say a deal between Betr and PointsBet could also be discussed.

PointsBet will also keep its fledgling Canadian business as part of the deal, which will be voted on by its shareholders next month, but its looming exit from the US marks the end of an era that saw the company become a high-flying market darling in 2021 when its shares topped $15.00 before the sheer cost of expansion in North America started to hit.

Online sports betting has flourished in America since the US Supreme Court in 2018 struck down the Professional and Amateur Sports Protection Act. Goldman Sachs had projected the size of the US sports betting market to rise to $US39bn ($57bn) by 2033 as more states around the country legalise digital betting on sports and racing.

PointsBet is now in 14 states and is the seventh largest US operator but racked up $450m in losses in 2021 and 2022, and its share price has been falling before a recent rally since the beginning of 2023 as the likelihood of some corporate activity increased.

Mr Swannell said the US business had been a “strategic success building a valuable asset” but that “the costs of operating in a state-by-state environment, together with the requirement to build significant scale to compete against well capitalised operators” led to PointsBet looking for potential suitors.

PointsBet shares fell about 15 per cent during trading on Monday after it announced the Fanatics deal.

Fanatics is best known for selling sports merchandise online and its owners have been keen to use its retail reach of 95 million existing customers to break into the lucrative yet competitive US sports gambling market.

Originally published as PointsBet could sell Australian arm after sale of US business to Fanatics for $222m