DraftKings Acquires Golden Nugget in $1.5 Billion All-Stock Deal
Sports betting giant DraftKings announced on August 9th that it had reached an agreement to acquire Golden Nugget Online Gaming in an all-stock transaction. The transaction has an implied equity value just north of $1.5 billion. The acquisition of the well-known iGaming brand will allow DraftKings to instantly reach a combined database of more than five million customers.
DraftKings has also announced a commercial agreement with Fertitta Entertainment, Inc., the parent company of the Golden Nugget. Jason Robins, CEO of DraftKings said that the acquisition helps the brand to reach a broader customer base. Robins mentioned the synergies between the two brands and the wide range of cross-selling opportunities and loyalty integrations they can explore in the future.
Tilman Fertitta, Chairman, and CEO of Golden Nugget Online Gaming said that he looks forward to the two market leaders merging into a leading global player in digital sports. Fertitta will be one of the largest shareholders of DraftKings and is widely expected to be an active member of their board.
Golden Nugget’s CEO expects the 20+ years of experience of the GNOG to help DraftKings to make further technology optimizations to its platform while also aiding the building of more efficient marketing campaigns.
Golden Nugget Preferred an All-Stock Deal
On the conference call with shareholders, Fertitta said that he views DraftKings as a clear market leader, the Coca Cola of daily fantasy sports. 'I wanted only stock. I wanted to ride this thing all the way up with these guys.’ The all-stock deal also helps to preserve DraftKings's balance sheet.
This will be a complex commercial agreement for both companies and DraftKings is also expected to reach a market access deal with the Houston Rockets to potentially get a license in Texas once the state legalizes sports betting. DK plants to open up a DraftKings Sportsbook at the Toyota Center, pending state approvals.
Golden Nugget Online Expands DraftKings' Potential Reach
Both parties are expected to deploy a multi-brand strategy that will enhance cross-sell opportunities to drive revenue growth. The deal is will help to reduce DraftKings's market access rates, as the brand will be able to obtain favorable terms through certain Golden Nugget's properties. A potential game expansion is also on the horizon, including various live dealer offerings.
By bringing Golden Nuggets Online Gaming onto the DraftKings platform using their in-house technology, most of the third-party platform costs will get eliminated and the operating expenses and vendor costs of the GNOG will essentially disappear.
The streamlined marketing strategies between the two brands should help DraftKings to realize a higher return on investment. Existing DraftKings players will get access to the new VIP promotional opportunities that are already known to the player base of the Golden Nugget Online Gaming platform. The VIP program allows players to purchase discounted rewards and to secure reservations to various online and offline events.
With the transaction, DraftKings will undergo a holding company reorganization and a new holding company will be formed. Golden Nugget Online Gaming stockholders will receive a fixed ratio of 0.365 shares of the New DraftKings' Class A Common Stock for each share of GNOG they hold on the date of the merger agreement (August 9, 2021).
Tilman Fertitta, who owns almost 50% equity in GNOG has agreed to hold the DraftKings shares issued to him in the process for a minimum of one year after the transaction has closed. The merger is subject to approval by the GNOG stockholders and is expected to close in Q1 of 2022.