In a stunning announcement August 9, DraftKings disclosed it will acquire Golden Nugget Online Gaming (GNOG) in an all-stock transaction worth about $1.56 billion. GNOG has been the leader in iGaming in the U.S. since its introduction in New Jersey in 2013.
With the acquisition, DraftKings can leverage not only the experience afforded by GNOG’s brand but the combined database of more than 5 million customers.
“Our demographics are largely male,” said Jason Robins, DraftKings CEO and chairman of the board. “We view this as an opportunity to take another iconic brand, this time in a casino state that’s done very well with early market leadership in New Jersey… We believe it will help us attain iGaming market share over the long term, including being more efficient with marketing and having tremendous synergies both on the cost and revenue side.”
Tilman Fertitta, chairman and CEO of GNOG, Golden Nugget casinos and Landry’s restaurants, becomes a member of the DraftKings board and one of its largest shareholders.
“This transaction will add great value to the shareholders as two market leaders merge into a leading global player in digital sports, entertainment and online gaming,” said Fertitta, who called DraftKings “the Coca Cola of this industry.”
Part of the deal includes a commercial agreement with parent company Fertitta Entertainment, Inc. “Together, we can offer value to our combined customer base that is unparalleled,” Fertitta said. “We believe that DraftKings is one of the leading players in this burgeoning space and couldn’t be more excited to lock arms with Jason and the DraftKings family across our entire portfolio of assets, including the Houston Rockets, the Golden Nugget casinos and Landry’s vast portfolio of restaurants.”
DraftKings will use a multi-brand strategy to enhance cross-sell opportunities and drive increased market share and revenue growth. In addition, there will be multiple channels for cost savings by eliminating platform costs, marketing efficiencies and reducing duplicative corporate overhead.
DraftKings expects to see revenue growth as well as potential technology and game expansion, including live dealer offerings and VIP access for its customers.
The commercial agreement will include marketing integrations, an expanded retail sportsbook presence and market access through certain Golden Nugget casinos. DraftKings will also become the exclusive daily fantasy sports, sports betting and iGaming partner of the Houston Rockets. The sports betting giant intends to open a sportsbook at the Rockets’ home base at the Toyota Center, pending state legalization and regulatory approvals.
The transaction is subject to approval by GNOG stockholders and regulators and is expected to close in the first quarter of 2022.
As part of the transaction, DraftKings will undergo a company reorganization and form a holding company, New DraftKings, that will become the going-forward public company for both DraftKings and GNOG. The new DraftKings will be renamed DraftKings Inc. at closing, according to CDC Gaming Reports.
The purchase should have little impact on Michigan players, at least not until the close of the sale early next year. Most folks in the state know that Golden Nugget and DraftKings are online operators. DraftKings Casino competes with rival FanDuel Casino for second place in revenue, behind state leader BetMGM Casino. Through June, DraftKings had earned $84.6 million in online casino revenue in less than six months, compared to BetMGM at $175.4 million and FanDuel at $89. Golden Nugget finished eighth with $18.2 million.
DraftKings could also use the Golden Nugget connection as a way to enter additional states such as Nevada, according to Play Michigan.com. Nevada has limited entry to its online sports betting market to companies that actually have bricks-and-mortar casinos in the state.
Fertitta Entertainment has amended a prior agreement and plan of merger with FAST Acquisition Corp., a special purpose acquisition company. Fertitta will contribute certain operating businesses not included before. These include Mastro’s brand, the Aquariums, the Pleasure Pier, Vic and Anthony’s and a handful of smaller restaurant concepts, adding a total of 42 incremental businesses. Fertitta Entertainment will be one of the largest publicly traded hospitality companies, with restaurants, amusement parks, hotels, entertainment venues and more.
“The addition of Mastro’s and the destination entertainment businesses provide tremendous cash flow and growth opportunities, and we are excited that Tilman is contributing the new assets to the Company,” said FAST co-owner Doug Jacob. “These brands create an even stronger portfolio to leverage for potential future acquisitions.”
The merger is not the only thing DraftKings has to cheer about. It’s increased its full-year revenue forecast for the third straight quarter thanks to the return of sports.
“While year-over-year comparisons were obviously impacted by Covid, our results were very strong relative to our expectation,” Robins said in a conference call with analysts and journalists August 6. “At this stage, we’re not seeing any signs of the economies reopening impacting demand for our mobile-product offerings. We continue to acquire customers efficiently with tech at or below our target.”
Robins said 25 state legislatures have introduced legislation to legalize mobile sports betting this year. Wyoming, Arizona, New York, Maryland, Louisiana and Connecticut authorized mobile sports wagering which raised the percentage of the U.S. population with legalized mobile sports betting to 39 percent.
Analyst David Katz of Jefferies, which also rates the stock “buy” with a $75 price target, said he expected the narrowing of DraftKings’ quarterly loss to drive shares higher. “The quarter continues to demonstrate better than expected execution and broadening areas of growth for the future,” Katz said.
DraftKings is cooperating with an SEC inquiry into allegations of money laundering and black-market gaming concerning Hindenberg Research and SBTech.
According to 247 Wall Street, bringing Golden Nugget’s iGaming platform under the DraftKings tent eliminates a competitor in the online gaming business. Golden Nugget stock traded up about 46 percent on the news to $17.91. DraftKings stock was up only fractionally to $51.70, in a 52-week range of $30.51 to $74.38.
