PointsBet Holdings has rejected a takeover proposal from Betr Entertainment, maintaining its position that shareholders should accept the alternative offer on the table from MIXI Australia.
Betr’s bid was made on an all-scrip basis (meaning the offer comprises entirely shares in the acquiring company, rather than cash), in contrast to the cash offer from MIXI.
PointsBet is disputing the valuation put forward by Betr, due to how it is calculated.
In an offer made directly to shareholders of the Australian gambling company, instead of its board, the buyer wants to acquire the shares at a ratio of 3.81 Betr shares for every PointsBet share.
This produces a top-level valuation of AUS $1.22 per PointsBet share, but not everyone agrees.
The board has outlined its assertion that the offer only amounts to AUS $1.03 per share when based on Betr’s 20-day volume-weighted average price (as of July 16), while raising further objections.
Those reasons for not recommending the offer include the lack of a cash alternative, exposing shareholders to market volatility and liquidity risks, and a VIP-heavy customer base. PointsBet also flagged what it described as “sub-scale” sportsbook operation, dominated by horse racing.
In contrast, the offer from MIXI Australia, a subsidiary of the Japanese tech and media house, has received unanimous support from PointBet’s board.
The all-cash proposal from MIXI presents an overall valuation of AUS $402 million, working out at $1.20 per share.
This latest MIXI bid is now officially open, and presented with a recommendation to accept, but it stands out from previous offers as it has a lower shareholder acceptance requirement.
It will need at least 50.1% approval from PointBet subscribers, but 17.18% has already been secured from the holdings of directors and pre-bid agreements from institutional holders.
Both Betr and MIXI are existing minority shareholders in PointsBet, with the former holding around 19.6%, compared to the latter’s 9.15%.
Another intriguing aspect of the ongoing saga is what the prospective bidders will do with PointsBet’s Canadian operation.
MIXI has not gone public with its true intentions, but it has gained regulatory approval in Ontario, where PB is still active, while it has the option of launching into Alberta, which will open a regulated betting market next year.
Betr has indicated it sees the other business as ‘unprofitable’, with a non-binding agreement in place with Hard Rock Digital for the sale of PointsBet Canada for AUS $29.6 million.
It would appear that the end of the line is near for Betr, but don’t rule it out just yet.
“This is just the start of the value creation journey we envisage for Betr and PointsBet shareholders for the combined business,” it said when lodging its bid.
Although PointsBet is clearly prioritizing MIXI, a fresh response from its competitor to the official rejection is likely in the coming days.
Image credit: PB
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