US sports betting operator DraftKings is set to buy Tilman Fertitta’s Golden Nugget Online Gaming (GNOG) in an all-stock acquisition that values the latter company at $1.56 billion.
The deal is viewed as a significant investment in iGaming as DraftKings looks to significantly strengthen its position in that industry.
GNOG was established late last year when Mr. Fertitta spun off the online casino and sports betting operation from his Golden Nugget land-based casino empire in a SPAC deal with Landcadia Holdings II, Inc., a blank-check company the Texas businessman formed in 2019 in partnership with New York-based Jefferies Financial Group.
Under the terms of the DraftKings acquisition deal, GNOG’s shareholders will receive 0.365 shares of DraftKings stock at a 53% premium to the online gaming firm’s shares’ closing price on Friday.
Mr. Fertitta, who serves as GNOG’s CEO and owns 46% of the company, has agreed to hold on to the DraftKings stock issued to him in the combination for at least a year after the transaction closes. He will also join the DraftKings Board of Directors.
The deal is expected to close in the first quarter of 2022, it also became known.
Betting Big on Online Gaming
DraftKings said it anticipates $300 million in cost savings from its tie-up with GNOG as the latter company brings platform and technology in house. The deal will also reduce fees to third-party providers and cut marketing costs.
DraftKings will further benefit from GNOG’s five million online casino players. Mr. Fertitta had himself said that iGaming customers are worth seven times the value of a sports bettor. And as mentioned earlier, industry analysts believe online casino-style gaming will become a leading driver of revenue growth in future as more and more states legalize it.
During the company’s second-quarter earnings call, DraftKings CEO Jason Robins said that online gaming provides them with a great opportunity to diversify their offering beyond sports seasons. However, while it has established itself as one of the leading US sports wagering operators, it has been struggling to win online casino customers on its iGaming platform.
Mr. Robins elaborated that they definitely feel that in the iGaming segment they “do better with people who are sports fans, that we can cross-sell” and that they have been working diligently to “extend our brand and extend our reach into the non-sports fan iGaming audience.”
DraftKings’ tie-up with GNOG will enable the sports betting and fantasy sports company to leverage Fertitta Entertainment’s other offerings and get promotional and marketing consideration with Mr. Fertitta’s Houston Rockets, Landry’s restaurant chain, and Golden Nugget land-based casinos.
Mr. Fertitta said that marrying his companies’ “broad entertainment offerings and extensive customer base” with DraftKings’ “mammoth network makes this an unbeatable partnership.”
This is the latest in a slate of merger and acquisition deals within the gambling industry announced in recent months. Earlier this year, Caesars Entertainment, Inc. completed the purchase of British betting specialist William Hill, while last week Penn National Gaming announced that it is set to acquire Canadian sports media and betting powerhouse theScore in a $2 billion deal.
Source: DraftKings to buy Golden Nugget Online for $1.56 billion, as gaming’s M&A streak continues, CNBC, August 9, 2021