DraftKings said it has entered into an agreement to purchase Golden Nugget Online Gaming (GNOG) in an all-stock deal valued at approximately $1.56 billion, combining one the largest online casino operators in the US with one of the nation’s largest sports betting operators.
Under the deal, GNOG shareholders will receive 0.365 shares of the new company resulting from the merger for every share of GNOG they own. Shares of DraftKings closed at $51.98/share on the NASDAQ exchange on Tuesday. The recent range of DraftKings’ stock prices placed the value of the GNOG transaction.
The agreement, subject to regulatory approval and customary closing conditions, is expected to close in Q1 2022. It also calls for the temporary reorganization of DraftKings into a holding company called New DraftKings, which will form the publicly-traded company for both DraftKings and GNOG going forward. The company name will revert to DraftKings post-closing.
DraftKings Becoming a Gambling Company
With GNOG, DraftKings gains a well-known traditional casino brand with a large portfolio of iCasino games and a database of more than five million customers. It represents DraftKings’ largest acquisition to date.
It also moves Boston-based DraftKings closer to transforming into a bona fide gambling operator. Golden Nugget held second place in terms of the online casino market, 26.5%, in June in New Jersey, according to data from the state Department of Gaming Enforcement (NJDGE). The longtime online casino operator had $27.6 million in revenue that month.
Golden Nugget also has an expanding presence in Michigan. While it was in the middle of the pack in June as far as operators go, Golden Nugget is the only operator of its size to be trending upward since the market’s inception in January. It had $4.3 million in online casino revenue and nearly 5% of the market in June, up from $3.8 million and 4% in May, according to data from the Michigan Gaming Control Board (MGCB).
DraftKings’ agreement to purchase GNOG is also telling because of its technology optimization component. DraftKings says it plans to migrate GNOG onto its tech platform. The reasons for this are likely two-fold, as DraftKings:
- is itself still in the process of migrating from its previous tech supplier, Kambi, to SBTech, which DraftKings acquired in early 2020; and
- specifically mentioned reducing operating expenses and vendor costs as a benefit from its acquisition of GNOG.
Synergies from the strategic benefits of the deal are expected to reach $300 million at maturity. Besides the tech migration, DraftKings said it expects to save money through streamlined marketing strategies—including promotional opportunities, the cross-selling of products and potential link-ups between the two brands’ secure reservations and rewards programs.
DraftKings is also rumored to be considering acquiring a poker platform.
The acquisition follows last week’s announcement that rival Penn National had acquired Score Media in a cash-and-stock deal valued at $2 billion. Penn National made the move in order to bolster its Barstool sports betting brand.
Commercial Agreement with Fertitta
In connection with the acquisition, DraftKings has inked a separate commercial agreement with Fertitta Entertainment, the parent company of the NBA’s Houston Rockets. Fertitta is also the parent company of Golden Nugget/Landry’s, a gaming, restaurant, hospitality and sports entertainment business.
The commercial agreement with Fertitta calls for granting DraftKings an expanded retail sportsbook presence and the opportunity to get market access of favorable terms through certain Golden Nugget casinos, which are owned by Golden Nugget/Landry’s.
GNOG CEO Tilman Fertitta will become a board member of the new DraftKings post-closing. He will also be one of the new company’s largest shareholders.
DraftKings will also become the exclusive daily fantasy sports, sports betting and iGaming partner of the Houston Rockets. It plans to open a sportsbook at the Rocket’s home venue, Toyota Center, pending state legalization and regulatory approvals. The opening of a sportsbook at the Houston stadium will get a boost if Texas legalizes sports betting.
