Apollo is considering merging Yahoo Sports with bookmakers, sources say

James Maloney of the Panthers is watching the NRL Rugby League Round 6 match between the Sharks and the Panthers at PointsBet Stadium on April 18, 2019 in Sydney, Australia.

Jason McCowley | Getty Images

Apollo Global Management, a private equity firm that acquired Yahoo from Verizon for $ 5 billion last year, is in preliminary talks with sports betting companies to merge its assets with Yahoo Sports, according to people familiar with the matter. .

One of the companies Yahoo spoke to was Australian PointsBet Holdings, which has a market value of about $ 760 million, said people who asked not to be named because the discussions are private.

All negotiations at this stage are still premature, and no deal is expected, people say. Yahoo has not achieved its goal and may not seek a deal, people say. Apollo and PointsBet spokesmen declined to comment.

Apollo and Yahoo are considering merging Yahoo Sports with an existing bookmaker, which could lead to the spin-off of Yahoo Sports, two people said. If the deal is done, the new company is likely to retain the Yahoo brand, people say.

Yahoo was the first provider of tools for fantasy sports and still has millions of players who are likely to become candidates for legalized sports betting. Legalized mobile sports games are slowly spreading across the country and are now in effect in 19 states.

In recent months, the sports betting industry has collapsed as a number of companies have made attracting customers more expensive through significant marketing costs and promotional offers. Last month, DraftKings predicted that earnings in 2022 before interest, taxes, depreciation and amortization would amount to losses ranging from $ 825 million to $ 925 million, exceeding consensus estimates of approximately $ 570 million. Salesman Jim Chanos told CNBC in December that he took a short position at DraftKings because of his “crazy” marketing costs.

“You can believe in sports betting … but this business model is wrong,” Chanos said.

Small public gambling companies, such as PointsBet and Rush Street Interactive, declined last year, battling competition with DraftKings, FanDuel and BetMGM, the market leaders in the industry. Caesars and their owned assets William Hill, Fox Bet and BetRivers of Rust Street are some of the other competitors vying for users in the low-income bookmaker business.

PointsBet is collaborating with former New Orleans Saints defender Drew Bryce in a number of television commercials that have aired on networks, including NBC. NBCUniversal of Comcast has entered into a multi-year partnership with PointsBet in 2020. Yahoo also has an existing betting partnership with BetMGM. It is unclear how future mergers will affect existing partnership agreements.

“Everyone is talking to everyone now,” said one of the leaders, who asked not to be named. “There needs to be consolidation.”

Intense competition has forced companies to offer hundreds or even thousands of dollars of free money to first-time subscribers.

While Yahoo is looking to run its own bookmaker, ESPN Disney is not interested in gambling, according to people familiar with the issue. Disney has negotiated licensing under which bookmakers can be branded under the name ESPN, but it has not been involved in buying a gambling company, people said. An ESPN spokesman declined to comment.

Apollo acquired Yahoo last year to grow and streamline the business after Verizon acquired it in 2017 and merged with AOL. Former Tinder CEO Jim Lanzon was appointed CEO of Yahoo in September. Apollo is now looking for heads of its Yahoo Sports and Yahoo Finance divisions to report to Lanzone, people familiar with the matter say.

Last month, Apollo also closed acquisitions to manage The Venetian Resort Las Vegas and the Venetian Expo in Las Vegas for $ 2.25 billion, which could theoretically promote a product for sports betting under the Yahoo brand.

Disclosure: NBCUniversal of Comcast is the parent company of CNBC.

WATCH: Short-seller Jim Chanos reveals betting against DraftKings

Apollo is considering merging Yahoo Sports with bookmakers, sources say

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