From the Rumor Mill – BetRivers sale likely completed by September

From the Rumor Mill – BetRivers sale likely completed by September

Sources have told insider Hartley Henderson that the sale of BetRivers is imminent.

Will the Sale of BetRivers be completed before the football season?

Earlier this year there were rumors that BetRivers, owned by Rush Street Holdings, would be sold as company directors did not see a path to sustained profitability in the North American market. A Bloomberg report from March indicated that Rush Street had been shopping its online operation ever since Fanatics bought PointsBet and Penn Gaming gave up the Barstool brand to launch ESPNBet. The directors, however, decided to keep the product because the offers they were receiving had not been sufficient, only DraftKings was in the ballpark.

Rush Street is owned by billionaire Harold Bluhm and partners and operates five land-based casinos in Pittsburgh, PA, Philadelphia, PA, Schenectady, NY, Portsmouth, VA and its largest operation in Des Plaines, Illinois, where the company was founded. Rush Street also owns the BetRivers brand, which launched in New Jersey in 2016 as PlaySugarhouse.com and has grown dramatically since the repeal of PASPA with website operations now in 19 states plus the province of Ontario. BetRivers has won several awards for its designs and offerings, but despite its size and reach, it has never been able to match the revenue of companies like DraftKings, FanDuel, BetMGM or BetCaesars. And, after Fanatics bought PointsBet, which like BetRivers had a license in every single market, company directors decided it was best to start looking for the exits, at least for its online product, since it will just fall further behind as other major retailers get in the game.

Rush Street financials for the first quarter of 2024 showed revenue of $217 million, up 34% from the same period last year, although the company still lost $2 million compared to $24.5 million in 2023. The average monthly revenue per user was $355, up 9% from the prior year. While they don’t list BetRivers figures separately, it is evident that the online brand is still a drain on revenues, since land-based casinos are apparently doing well and making money. According to evaluators, as of July 1st Rush Street Interactive as a whole was estimated to be worth $1.93 billion.

Despite the numbers, Rush Street stock has increased to almost $8.80 per share compared to just under $3.20 per share at the same time last year leading to speculation that investors are expecting the sale to be completed sooner rather than later. In fact, when the Bloomberg report indicated that Rush Street pitched the sale of BetRivers to DraftKings in March, the stock immediately jumped and the fact it has remained high and even increased in value since, makes it clear that it is more than a rumor. When there is no substance to rumors, stock price almost always falls, but Rush Street stock just keeps increasing ever so slightly. There was no indication how much DraftKings is willing to pay for BetRivers although DraftKings paid $1.56 billion in DraftKings stock to purchase Golden Nugget Online Gaming in 2021 to get an immediate foothold in the states GoldenNugget.com operated, so it’s not inconceivable DraftKings could pay a similar amount for BetRivers and the rights to the land-based sportsbook operations at the casinos.

While the company would be of interest to smaller companies who would love to increase their presence. Or even stalwarts like Bet365, who are anxious to increase their U.S. presence in states such as New York, Illinois and Pennsylvania, all of which could be most easily achieved by buying BetRivers (Bet365 is currently in 10 states and Ontario). However, the rumor is still that DraftKings is the leading candidate since they have the most money to buy BetRivers.

The question is why they want it?

The answers, according to sources is that they want to block other large companies like Fanatics from getting a quick foothold should they decide to get into the business and there are some suggestions that Amazon is the latest behemoth looking at moving into online gambling space. So, DraftKings along with FanDuel would want to prolong that from happening and going through the licensing process can be cumbersome, but simply taking over an existing state license is simple. BetRivers also has a partnership deal with the Pittsburgh Penguins and other franchises, which no doubt DraftKings would love to use to promote the product where it is allowed. Moreover, with the current state licenses BetRivers has, DraftKings could view it as an investment which they could sell to some other brands they don’t fear, if the market heats up to make a quick profit. More importantly, DraftKings doesn’t own any land-based casinos but does have deals to run the sportsbooks at various casinos around the U.S. and this would be a chance to expand its retail sportsbook operations to Pennsylvania, upper New York and Illinois, which they think will be a gold mine. There is also some belief that Bluhm may use the proceeds of the sale to open more casinos in some larger cities looking to expand gambling, including New York City and DraftKings would love to be the retail sportsbook operator in those cities.

The one question not clear is whether the sale would include all assets or just the U.S. assets. PointsBet decided to keep the Ontario product because Fanatics made an offer for the Ontario licence that PointsBet inferred was insulting, Although DraftKings has not been as successful in Canada as it has been in the United States (possibly because they got a delayed start and lost their fantasy sports option), they may view the purchase of BetRivers as an opportunity to expand, since BetRivers is apparently is doing well in Ontario with different customers than DraftKings currently has.

So, when will this sale take place?

According to sources, the sale is imminent and will happen before the end of the summer. The source said that the deal is almost finalized and right now the two companies are simply figuring out the final details, including the sale price, which keeps fluctuating as BetRivers stock increases, and also what specifically DraftKings will be allowed to offer at the five land-based casinos. This is expected to be resolved soon as Rush Street wants the sale to be completed before second quarter results come out, which could tank their value again.

Read insights from Hartley Henderson every week here at OSGA and check out more of Hartley’s RUMOR MILL!

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