The dizzying pace of mergers and acquisitions continued on Monday morning with news that DraftKings had made a $1.5 billion all-stock purchase of Golden Nugget Online Gaming (GNOG). The deal includes a “commercial agreement” with Fertitta Entertainment Inc., the parent company of the NBA’s Houston Rockets, Golden Nugget, and the Landry’s restaurant chain.
Golden Nugget has been a market leader almost since online casino was legalized in New Jersey in late 2013 — only ceding the lead recently to Borgata, a much larger brick-and-mortar space in Atlantic City that was surpassed by Golden Nugget in the online casino field in 2017. Live dealer table games have been a key point of attraction for Golden Nugget’s online product, and part of Monday’s announcement suggests that DraftKings expect to be able to enhance such options with Golden Nugget.
“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,” DraftKings CEO Jason Robins said in a statement. “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.”
One of the challenges for companies getting into the mobile sports betting space is the low rate of return — often hovering around 5% — on such gambling. Online casinos, while tending to generate less media attention, are a bigger driver of profits. In the first half of 2021 in New Jersey, for instance, companies collected $368.3 million from sports betting — compared to $1.11 billion from online casino gaming.
“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 Tilman Fertitta, chairman and CEO of GNOG. “Together, we can offer value to our combined customer base that is unparalleled.”
Today, @DraftKings announced they entered into an agreement to acquire Golden Nugget Online Gaming, and in connection, DraftKings has entered into a commercial agreement with Fertitta Entertainment. For more details, visit: https://t.co/PyUO0QJUEf pic.twitter.com/PmEnpqaD2S
— DraftKings News (@DraftKingsNews) August 9, 2021
How the deal works
Executives from the two companies noted a variety of expected cost savings from the merger, such as “eliminating platform costs as a result of migrating Golden Nugget’s current technology to DraftKings’ in-house proprietary platform, recognizing enhanced returns on advertising spend through marketing efficiencies, and reducing costs such as duplicative corporate overhead.”
The announcement went on to read: “The commercial deal will also reduce DraftKings’ market access rates through preferred pricing with Golden Nugget-owned properties and an exclusive commercial deal across daily fantasy sports, sportsbook and iGaming with the Houston Rockets, which further solidifies the deep partnership between DraftKings and Fertitta Entertainment.”
In what seems a bit on the highly optimistic side given the static gaming environment in Texas, the press release states that “DraftKings will also become the exclusive daily fantasy sports, sports betting, and iGaming partner of the Houston Rockets and intends to open a sportsbook at the Toyota Center, pending state legalization and regulatory approvals.”
DraftKings will undergo a holding company reorganization and form a new holding company called “New DraftKings” that will become the public company for both DraftKings and GNOG.
Golden Nugget Online Gaming stockholders are expected to receive a fixed ratio of 0.365 shares of New DraftKings’ Class A Common Stock for each Common Share of Golden Nugget Online Gaming they hold. Fertitta, who owns nearly half of the equity in GNOG, announced that he has agreed to continue to hold the DraftKings shares to be issued to him in the merger for a minimum of one year from the closing of the transaction.
When will it all happen?
The transaction is subject to approval by Golden Nugget Online Gaming stockholders, the receipt of required regulatory approvals, and other customary closing conditions — and, according to company officials, is expected to close in the first quarter of 2022. The approval of the transaction by Golden Nugget Online Gaming stockholders is expected to be obtained through a written consent provided by Fertitta.
DraftKings Sportsbook is live with mobile and/or retail betting operations in Colorado, Illinois, Indiana, Iowa, Michigan, Mississippi, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Tennessee, Virginia, and West Virginia. Furthermore, the company is the official daily fantasy partner of the NFL, MLB, NASCAR, PGA TOUR, and UFC; an authorized gaming operator for the NBA and MLB,; an official sports betting partner of the NFL; an official betting operator of the PGA Tour; and the official betting operator of UFC.
Golden Nugget casinos are located in Las Vegas, Atlantic City, Mississippi, and Louisiana.