DraftKings zeroes in on the iGaming world by striking an acquisition deal with Tilman Fertitta’s Golden Nugget Online Gaming. The transaction is estimated to cost $1.56 billion and is expected to yield synergies worth over $300 million for DraftKings.
On Monday, August 9th, DraftKings announced that it came to a definitive agreement to buy out Golden Nugget Online Gaming (GNOG) in a $1.56 billion stock transaction. From this deal, DraftKings will create a new holding company and give 0.365 shares to GNOG shareholders for each common share that they own. This, therefore, puts a 53% premium to the closing price of GNOG shares on Friday, August 6th.
After the announcement of the acquisition agreement, GNOG shares on the Nasdaq surged by up to 18.71, a 52% jump. Meanwhile, DraftKings stock on the Nasdaq rose by 2% then snapped back to its usual position by the end of the trading day. Currently, the market cap of DraftKings, one of the most dominant sportsbook brands in the US, is a whopping $20.68 billion. The sports betting and daily fantasy sports (DFS) giant became publicly traded by merging with a special purpose acquisition company (SPAC) in 2020.
Tilman Fertitta, the Chairman and Chief Executive Officer of Golden Nugget Online Gaming, shared a few words saying:
Quote“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. Leveraging Fertitta Entertainment’s broad entertainment offerings and extensive customer database, coupled with DraftKings’ mammoth network, makes this an unbeatable partnership.”
The GNOG CEO, Tilman Fertitta, is the company’s majority shareholder, holding 47% equity of the entire business. Golden Nugget Online Gaming was formed in 2020 by creating an independent entity from the online sports betting and iGaming operations of the larger Golden Nugget Casino gaming company. GNOG was successfully spun off after a $745 million reverse merger acquisition deal with a SPAC known as Landcadia Holdings II, where Fertitta served as CEO and co-chairperson.
As part of this buyout transaction, the DraftKings company will be reorganized to form a new holding company going by the name New DraftKings. Henceforth, the newly formed holding company, i.e., New DraftKings, shall be the holding company for the DraftKings and Golden Nugget Online Gaming entities. When the deal is closed, New DraftKings will drop the name to become DraftKings Inc.
Fertitta, the billionaire investor, disclosed that he would maintain his ownership of his DraftKings Inc shares for at least 12 months after completion of the GNOG buyout transaction. As part of the arrangement, Fertitta will also be joining the board of directors of DraftKings. In part of his statement about the buyout agreement, he added that:
Quote“Together, we can offer value to our combined customer base that is unparalleled. 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. This is a strong commercial agreement for both companies.”
DraftKings Jumps into the iGaming Bandwagon in Style
After this acquisition, DraftKings will gain access to over 5 million loyal customers that Golden Nugget Online currently serves. With such a massive customer base, DraftKings has a sure-fire pivoting point to diversify its brand in a new gaming vertical other than sports betting and daily fantasy sports alone.
Better yet, this acquisition also comes in handy for DraftKings as it will save the company a ton of money that will be channeled elsewhere. How so? Well, with GNOG under the DraftKings umbrella, the latter will no longer have to go to third-party providers for casino technology. Further, marketing costs will also be cut down significantly – the company will seamlessly get consideration for promotional and marketing campaigns with the Golden Nugget land-based casinos, Landry’s chain of restaurants, and Fertitta’s Houston Rockets.
Per DraftKings’ estimates, upon maturity of the GNOG acquisition deal, the company is poised to rack up to the tune of $300 million in synergies. This will be possible by executing a multi-brand strategy that will facilitate cross-selling opportunities, which will, in turn, boost the company’s market share and win more revenue.
Jason Robins, the Chief Executive Officer of DraftKings and Board Chairman of the company, voiced his enthusiasm in the new arrangement, saying:
Quote“Our acquisition of Golden Nugget Online Gaming, a brand synonymous with iGaming and entertainment, will enhance our ability to instantly reach a broader consumer base, including Golden Nugget’s loyal ‘iGaming-first’ customers. This deal creates meaningful synergies such as increased combined company revenues driven by additional cross-sell opportunities, loyalty integrations, and tech-driven product expansion, as well as technology optimization and greater marketing efficiencies. We look forward to Tilman being an active member of our Board and one of our largest shareholders.”
The GNOG buyout move from DraftKings is similar to the deal that Penn National Gaming inked last week to acquire Score Gaming and Media for its robust tech and vast customer base. Earlier in March, Bally’s Corp made a similar move and acquired Gamesys Group in a $2.74 billion transaction.
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