Fanatics agreed to acquire the U.S. operations of PointsBet, marking a leap into U.S. sports gambling for the company. The deal is worth about $150 million in cash.

“Fanatics and PointsBet are excited to enter into an agreement for Fanatics Betting and Gaming to acquire PointsBet’s U.S. business,” the companies said in a joint statement. “While there are still several steps in the process to complete the acquisition, both parties are confident in the outcome. Fanatics Betting and Gaming and PointsBet will provide further details of the proposed deal and timely updates in the coming weeks.”

Fanatics, the largest sports apparel and collectibles company worldwide, entered the sports betting landscape in 2023. It launched its first retail sportsbook in Maryland in January and in March launched a beta version of its mobile sportsbook in Tennessee and Ohio.

The deal with PointsBet is expected to allow Fanatics to gain access to at least 15 states, including New York, New Jersey, Illinois, Michigan, and Pennsylvania. Fanatics expects to have access to the majority of states where PointsBet operates by the start of the NFL season, a source told CNBC.

Fanatics reportedly has been in talks with various sports betting companies over the past year as it plots its path forward in mobile gambling. Fanatics also reportedly funded some of the remaining cash flow burn from PointsBet, which has had to spend heavily on marketing to compete with larger rivals Draftings and FanDuel.

PointsBet, whose shares are traded in Australia, is the seventh-largest online operator for sports betting, according to the news release. PointsBet will retain its Canada and Australia business operations. PointsBet plans to hold a shareholder vote on the deal in late June.

PointsBet in a statement forecasted a loss of between $77 million and $82 million for the second half of 2023. Citing “very challenging” market conditions, the company said in a statement late Sunday that it would need to raise additional capital at a “significant discount to recent market prices” in the near term if the deal with Fanatics fell apart.

PointsBet Chairman Brett Paton said: “In view of the U.S. market in which the company has significant operations, the Board has explored and considered a wide range of strategic alternatives over an extended period of time. Having considered all of the options potentially available to the company, the Board believes the Fanatics Betting and Gaming proposal optimizes value for shareholders. The acquisition by Fanatics Betting and Gaming of our U.S. business will enable PointsBet to return significant capital to shareholders while retaining strong Australian and Canadian businesses supported by our leading proprietary technology in a capital-light setting.”

PointsBet Managing Director and Group CEO Sam Swanell said, “Despite the strategic success of building a valuable asset in the U.S., the cost of operating in a state-by-state environment, together with the requirement to build significant scale to compete against well-capitalized operators, led us to explore a number of options.

“The sale of the U.S. business to Fanatics Betting and Gaming delivers the most attractive risk-adjusted value outcome for shareholders compared to the risks and benefits of other options including the status quo. Fanatics Betting and Gaming has recognized our strategy, technology and team as a platform for their own expansion in the online sports betting and iGaming market. Given Fanatics’ significant presence in the US sports market, we consider them to be a natural acquirer of our U.S. business.

“I would like to thank Fanatics Betting and Gaming’s CEO Matt King and his team for working with the PointsBet team on the significant amount of constructive diligence that has been done leading to this proposed transaction. “Importantly the proposed transaction removes the risks and capital requirements associated with executing the Company’s United States strategy.”

Fanatics is a sports platform company with a private valuation of $31 billion. The company has forecasted 2023 revenue of $8 billion. Fanatics owns e-commerce assets, a sports trading card business and is building a sports betting division. The company acquired trading card company Topps for $500 million last year.

Illustration courtesy Fanatics