Sources familiar with the discussions revealed that PointsBet will continue to recommend its shareholders accept an earlier offer of $150 million from Fanatics, a Florida-based company.
DraftKings, known for its fantasy sports contests, presented the higher bid for PointsBet's US business on Friday. However, the offer remains non-binding and indicative.
In a letter from PointsBet's chairman, Brett Paton, to DraftKings CEO Jason Robins, Paton outlined the terms of engagement and requested written confirmation that DraftKings would fund PointsBet's US operations during the regulatory approval process.
PointsBet, the seventh-largest sports betting operator in the US, has struggled to achieve profitability. The company is projected to incur losses between $115 million and $123 million in the first half of the year.
Moelis & Co has been appointed to assist with the sale of PointsBet's North American business, while the potential sale of its Australian operations is still being considered with the help of Flagstaff.
DraftKings, a major competitor of PointsBet in the US market, has benefited from the legalization of gambling across the country. Founded in 2012, DraftKings operates sports and gaming products in various countries and states.
The company went public on Nasdaq in 2020 through a special-purpose acquisition company called Diamond Eagle Acquisition.
Although the latest offer from DraftKings has been made public, it is uncertain if Fanatics will present an improved proposal. Fanatics, supported by notable figures such as Jay-Z, Meek Mill, Maverick Carter, the NFL, and SoftBank, expressed their belief that DraftKings' bid was an attempt to hinder their deal with PointsBet.
The shareholder meeting scheduled for June 30, where approval for the Fanatics takeover was expected, will proceed as planned. A formal offer from DraftKings would need to be submitted by June 27, according to sources.
Some speculate that Fanatics or DraftKings could potentially bid for the entire ASX-listed company to gain favor with shareholders and the board.
PointsBet CEO Sam Swanell has previously stated that after the sale of the US business, the Australian and Canadian operations would break even within a year. Previous suitors for PointsBet's Australian bookmaking division include Betr, backed by News Corp, as well as Entain and Tabcorp.
On Friday, PointsBet shares closed slightly higher at $1.36, representing a decline of over 33% in the past year.