“Jason’s Revenge” is the latest attraction in sports betting — not in a horror flick, but in a high-profile merger battle.
DraftKings CEO Jason Robins — currently pitted against Michael Rubin, the billionaire boss of Fanatics to buy the PointsBet sports betting business — has made his rival bid two years after DraftKings and Fanatics secretly held merger talks, two sources close to the situation said.
DraftKings in early 2021 was in deep talks with Fanatics in what would have been a 50-50 merger with each company valued at about $24 billion, sources said, revealing high-stakes negotiations that have not been previously reported.
But Rubin, whose net worth is pegged by Forbes at $11.4 billion, walked away near the end of the process, the sources said.
In response, Robins — who has since seen DraftKings shares plunge by more than half, leaving his entire company valued at just $11.5 billion — has held a grudge ever since, the sources said.
“Jason was stopped and now he is returning the favor,” a sports betting executive said of the hard-charging DraftKings boss.
In a written statement, a DraftKings spokesman said the company’s PointsBet bid is “centered around the significant synergies and financial rationale, along with the interesting product and technology capabilities we would acquire through the proposed transaction.
“To suggest that there is an ulterior motive that is personal and not business related is irresponsible and not grounded in reality,” the spokesman added.
Reps for Fanatics declined to comment.
DraftKings on June 16 made a surprise, last-second bid to buy PointsBet’s US business for $195 million, topping Fanatics’ $150 million deal reached a month earlier by 30% and throwing into doubt its ambition to become the third major player in the sports betting space.
“It’s a move to delay our ability to enter the market,” Rubin said earlier this month when asked in a CNBC interview about the rival offer. “I guess they are more concerned about us than I would have thought.”
FanDuel presently has the biggest US sports betting market share at roughly 45%, and DraftKings is second at 29%, with no one else being close, according to Eilers & Krejcik Gaming,
PointsBet has one of nine licenses to book on-line New York bets.
New York has no plans to issue more licenses.
“DraftKings already has scale,” the sports betting source said, adding that DraftKings is mainly looking to block Fanatics from getting PointBet’s valuable New York sports betting license.
“If you want to be a player you have to be here,” the sports betting executive said. “It’s the largest state. California, Florida and Texas are not offering sports betting.”
If Rubin can tap into the sports betting market, he can cross-market the service to his tens of millions of customers that buy its officially licensed sports team gear.
DraftKings, meanwhile, would be taking a risk by acquiring PointsBet’s US operations.
PointsBet said its intent is to ask DraftKings for a “hell or high water” merger agreement, meaning DraftKings would be forced to buy PointsBet’s US operations even if it cannot get regulatory clearance.
Getting Federal Trade Commission approval looks risky because regulators may not want one of the two sports betting giants cutting off a promising competitor, sources said.
The PointsBet shareholder vote on the Fanatics offer is June 30 so Robins will have to decide soon whether to take the plunge.
DraftKings lost $390 million in the three months ended March 30 and had $1.1 billion in cash, according to its public financials.
The company can afford a $195 million loss on PointsBet if it hits its projections to be profitable next year but it would leave less room for error, sources said. Privately held Fanatics in December was valued at $31 billion after a new fund-raising round.