PointsBet hopes to fuel U.S. expansion with $43 million acquisition of betting platform company

Key Points
  • PointsBet will pay 55% cash and distribute one million in shares to Banach Technology after acquiring it.
  • The software company creates in-play bets, which PointsBet estimates will grow to 75% of bets in the U.S. market.
James Maloney of the Panthers looks on during the round 6 NRL rugby league match between the Sharks and the Panthers at PointsBet Stadium on April 18, 2019 in Sydney, Australia.
Jason McCawley | Getty Images

Banach Technology is referred to as the Robinhood of sports gambling, and PointsBet now owns it.

The sports betting company acquired Banach in a $43 million transaction on Monday. Banach is a business-to-business software company that creates sports betting platforms and algorithms, including in-play wagers.

PointsBet, which is based in Australia with a U.S. headquarters in Denver, will pay 55% cash for the company, issue 1.75 million shares, and pay $4 million to assist in converting the two firms.

In an interview with CNBC on Monday, PointsBet CEO Johnny Aitken said, "multiple benefits will be unlocked by this transaction," including PointsBets' enhancing in-play offerings.

"The trend in this industry, especially in the U.S., will be all around in-play betting," said Aitken, estimating "roughly 50 percent" of bets are currently placed in-game. "Within three years, our expectation is roughly 75 percent of bets will be placed in-play. So the future of the U.S. sports betting opportunity is in-play [bets]."

PointsBet wants to gain market share in U.S. sports gambling. Research firm Grand View Research estimates the global online gambling market size will reach $127.3 billion by 2027. And U.S. sports betting revenue has been forecast to reach $2.5 billion this year and $8 billion by 2025.

PointsBet is betting on in-play wagering, which allows consumers to make micro-bets during games. Other firms like FanDuel are also investing in-play technologies, as it has partnerships with tech company Simplebet.

"As the American bettor gets more comfortable with sports betting, they get more comfortable with other options, get more curious, and seek the best technology," said Aitken. "And that's the opportunity for PointsBet. We own our technology."

In January, PointsBet also agreed to an equity deal with the National Hockey League that granted the league roughly $556,000 worth of stock. PointsBet also agreed to an equity deal with CNBC parent company NBCUniversal valued at $500 million. In the five-year agreement, NBC has the right to increase its stake to 25%, a PointsBet representative confirmed. 

"For the NBC deal, the more successful that NBC makes PointsBet, the more they become successful with their equity holding," Aitken said. "When you think about in-play betting and the future of a sports broadcast, it's all about that in-game engagement. In-play betting and in-play bet stats integrated into the broadcast can not only make people watch more games but also extend the duration of their viewing."

Banach is based in Ireland, and its co-founders will now join PointsBet, including CEO Mark Hughes, who will transition to PointsBet chief operating officer. Banach founders helped establish the quantitative analyst division of Flutter Entertainment (formerly Paddy Power), which owns FanDuel.

Aitken called Banach founders "modern thinkers" and compared the company to the Robinhood app's founders. "We think in a modern way, and what has worked in the past isn't going to work in the future," he said. "The industry is changing, and betting in America is going to grow.  You need to be ahead of the trends."

Flutter, which trades on the London Stock Exchange, has a market capitalization of £27.7 billion (about U.S. $39 billion). Last week, CNBC reported its considering spinning out FanDuel as a separately traded company to trade on a U.S. exchange.

Disclosure: Comcast owns NBCUniversal, which is the parent company of CNBC.

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