PointsBet in ‘advanced’ talks about North American sale as revenue growths sharply

The betting group is in ‘advanced talks’ about selling its North American betting arm as moves to exit the local market take a new direction following a breakdown in discussions with Betr.

Shaquille O'Neal is face of the PointsBet brand in Australia. The group is in advanced talks to sell is North American arm. Photo by Brett Hemmings/Getty Images for TLA)

PointsBet has ended discussions with rival Betr about the potential sale of its Australian business, as talks remain “well advanced” on selling its North American arm that has racked up heavy losses.

The move comes as the bookmaker reported rolling 12-month net win to March 31 of $374.6m, with North American net win up 128 per cent and Australian net win down 3 per cent to $50.7m.

The ASX-listed group told investors on Friday that while discussions with Betr have ended, it was pursuing talks with multiple third parties about offloading its loss-making local arm.

Betr and PointsBet held discussions last year about a potential sale that was said to be worth between $200m and $250m.

Betr is run by digital wagering guru Matthew Tripp and is backed by an ownership group including News Corp Australia – publisher of The Australian – and Las Vegas-based Tekkorp Capital, owned by Australian wagering entrepreneur Matt Davey.

Confirmation talks with Betr were dead in the water weighed on PointsBet’s share price, which tumbled 8.7 per cent to $1.51 on Friday.

A one-time market darling, Pointsbet shares have fallen 41 per cent in the past 12 months and are well off their record highs around $15 in early 2021.

Bell Potter on Friday retinerated its buy recommendation and upgraded its target price to $3 on the potential for a big day for investors if it exits the US.

PointsBet has appointed Moelis & Co to help accelerate the sale of its North American business, saying discussions with multiple parties in respect of potential transactions that would involve part or all of that unit were “well advanced”.

Pursuing the North American market has been costly for PointsBet, with the company racking up more than $450m in losses over the previous two years. It also cut 12 per cent of its North American workforce for expected annualised savings of $6m.

PointsBet chief executive Sam Swannell said the group had started to turn the page in the US, delivering strong customer growth while at the same time cutting expenses including advertising.

“The past three quarters have seen growth in excess of 100 per cent since we’ve made the move to target the right types of markets instead of mass advertising — playing to our strengths of being a tech-led company with a high quality offering has helped us see traction,” he said.

“We are delivering a high growth outcome and delivering as a group — a lot of focus has been in North America and you can’t do much more than multiple quarters of 100 per cent plus growth while at the same delivering savings and not increasing marketing.”

Mr Swannell added that both its Australian and North American business remained valuable to the company, but that it was the group’s job to maximise shareholder returns and value if an opportunity did arise.

“Our job is to get on with delivering performance that we are seeing in the past three quarters — we are outgrowing the Australian market and if there is an opportunity to create shareholder returns with strategic value then that is something we will explore,” he said.

Australia proved difficult for PointsBet in the March quarter, with net win (total amount wagered minus amount paid to winners) down 3 per cent on sluggish punting in racing.

Mr Swannell said the Australian market was going through a quiet and period and was ripe for consolidation in the post-Covid world.

“Coming out of Covid there has been a pause in the market with racing slowing down, but we’ve also seen sports betting growing well, particularly NBA and soccer,” he said.

“We do see that consolidation is likely in the local market given volatility around the VIP area and the volume of small players throwing around promos to win business.”

PointsBet reported that it had 555,125 global cash active clients in the March quarter as it reaffirmed that it expected second half normalised group EBITDA loss to be between $77m and $82m.

Net cash out flow was expected to be approximately 30 per cent lower than the first half.

Originally published as PointsBet in ‘advanced’ talks about North American sale as revenue growths sharply