Pointsbet shares surge on talk offer is pending for the online bookmaker

Australian betting company Pointsbet could be in play for more than $300m, and sources say a deal with a potential merger partner or takeover bidder is imminent.

Pointsbet chief executive Sam Swanell. Picture: Stuart McEvoy

Pointsbet could soon be the subject of a takeover bid worth more than $300m from an overseas suitor, sources have told The Australian.

The ASX-listed bookmaker is in recent months understood to have had several discussions with potential merger partners or companies looking to acquire it. Some of the discussions are likely to have been informal.

Pointsbet shares are up more than 80 per cent since the start of September, and climbed about 6 per cent on Friday.

At least one suitor – multiple sources have said it is from Asia – is said to have entered serious talks about a potential merger with, or takeover of, Pointsbet, which would likely be subject to regulatory approval and Foreign Investment Review Board scrutiny.

The company’s market capitalisation reached about $290m on Friday. Any takeover offer would likely be at a premium to its current share price, suggesting a bid would be more than $300m.

Headed by chief executive Sam Swanell, Pointsbet had wagering turnover in Australia of about $628m in the September quarter, according to documents lodged with the ASX last week.

The company said it had about 287,000 cash active customers in Australia, up about 5 per cent from the previous quarter.

Pointsbet’s shareholders include the youngest billionaire in Australia, cryptocurrency gambling magnate Edward Craven and his Stake.com co-founder, Bijan Tehrani.

The Melbourne-based pair (Tehrani is an American citizen) had built a shareholding of slightly more than 5 per cent, an investment understood to be more about learning about the Australian market and other sportsbook and racing betting strategies than firm plans to launch a takeover offer themselves in the near or medium term.

Pointsbet management would not respond to questions from The Weekend Australian about any potential deal.

The company has had a rollercoaster ride on the ASX, growing quickly during Covid-19 lockdowns and at one stage, in August 2020, having a market capitalisation of more than $2bn after a $300m capital raising.

At the time, Pointsbet had big growth ambitions in the US market where it aspired to capture 10 per cent of what is increasingly becoming a huge online betting market as various states legalise digital gambling.

But it lost $450m in its first two years of chasing the American dream, including big marketing spending as it began operations in new jurisdictions and rolled out offerings and enticements to more customers.

While Pointsbet was able to increase its market share, costs weighed heavily on its financial results and share price, and after receiving several bids it sold its US business for $US225m ($340m) to sports merchandising giant Fanatics.

That transaction meant Pointsbet focused on its Australian arm and a small but growing Canadian business, and by the end of April and mid May it had returned $442m capital to shareholders in two transactions.

Its Canadian business had $69m turnover in the September quarter – up 57 per cent from the previous corresponding period.

Pointsbet’s share price on Friday was the highest it has traded at since May.

Any potential deal for Pointsbet would shake up what has been a sluggish gambling market in Australia, which faces potential hits from a mooted federal government crackdown on gambling advertising.

The market has been soft for ASX-listed companies such as Tabcorp, Pointsbet and Bluebet, with cost of living pressures weighing on customers who are betting less often and in smaller amounts than at the height of Covid-19 lockdowns.

Pointsbet last week said it expected to be cashflow break even in the current financial year.

It is targeting $280m to $290m in revenue for the full year and would “continue to outperform the market and grow market share” in Australia and Canada.

It was expecting full-year earnings before interest and tax, depreciation and amortisation, of $11m to $16m.