It doesn’t appear that an Australian gaming operator is going to end up in the hands of Betr.
Key Takeaways
- PointsBet tells shareholders it prefers to take an offer from Japanese digital and entertainment company MIXI
- The Australian gaming company took issue with Betr’s synergies estimation and “less valuable” VIP customer base
- Betr offered 3.81 per share, equal to 1 PointsBet share, but there are cash certainty concerns
PointsBet’s Board unanimously rejected an unsolicited, conditional off-market all-scrip takeover offer from the U.S.-based fantasy and sports betting operator due to cash certainty concerns and “unattractive” aspects of Betr’s business.
Instead, the Australian and Canadian sportsbook and online casino owner of BlueBet announced it prefers an offer made by a Japanese digital and entertainment company.
“The PointsBet Board has determined, with the assistance of external advisors, that the Betr Proposal is materially inferior to the MIXI Takeover Offer,” the company stated in a press release.
PointsBet didn’t like Betr’s characterization of value and pointed to a considerably less financial offer when calculating volume-weighted average prices over relevant trade prices.
PointsBet was also concerned with a potential change in the value of the scrip offer, due to the low liquidity of Betr’s shares. That could lead to a lack of cash certainty if PointsBet shareholders decided to sell shares.
Business issues
Another major sticking point for PointsBet is the uncertainty of the outcome and timing of Ontario gaming approvals, which MIXI has already completed.
PointsBet took exception to Betr’s “less valuable and volatile VIP-heavy customer base.”
PointsBet said 50% of Betr’s win is generated from 20 customers. The company detailed several “meaningful risks” from this business model, including long-term sustainability, regulatory and compliance issues, and unpredictable margins.
PointsBet also doesn’t think Betr’s horse-racing model, which represents 85% of its net win, gives the company enough room for growth.
Better offer?
In a proposal made on July 16, Betr offered 3.81 of its shares in exchange for each share of PointsBet, claiming a market value of AU$1.22 per share, based on Betr’s price of $0.32.
Betr also included $44.9 million in expected annual cost synergies, which would only be available if Betr assumes 100% of the company, to reach a potential PointsBet price of $1.89 per share. PointsBet doesn’t see that as attainable.
“The value of the cost synergies identified by Betr has been materially overstated, having regard to a number of factors,” PointsBet said.
The Japanese company’s subsidiary MIXI Australia made an all-cash offer that comes with a $1.20 price per share and a valuation of $402 million (US$206 million), a $49 million value growth over Betr’s proposal. MIXI’s offer also comes with a lower shareholder acceptance, needing 50.1% backing.
What’s next?
Betr, which operates a sportsbook in Ohio and Virginia, hasn’t responded to PointsBet’s rejection, and it could present a more pleasing counter-offer to the Australian company.
However, it might not have much time.
“The PointsBet Directors Unanimously recommend that PointsBet shareholders accept the MIXI Takeover Offer, in the absence of superior proposal,” the company said.
PointsBet needs 50.1% of backing to complete the deal with MIXI. PointsBet said it will provide a more detailed target statement on why it’s proposing to accept MIXI’s offer at a later date.
