- DraftKings Inc. (Nasdaq: DKNG) announced it is buying Golden Nugget Online Gaming, Inc. (Nasdaq: GNOG) in a deal valued at $1.56 billion. This is why.
DraftKings Inc. (Nasdaq: DKNG) and Golden Nugget Online Gaming, Inc. (Nasdaq: GNOG) announced that they have entered into a definitive agreement for DraftKings to acquire Golden Nugget Online Gaming in an all-stock deal that has an implied equity value of approximately $1.56 billion. The deal will enable DraftKings to leverage Golden Nugget’s well-known brand, iGaming product experience, and existing combined database of over 5 million customers. In connection with the deal, DraftKings has entered into a commercial agreement with Fertitta Entertainment, the parent company of the Houston Rockets, Golden Nugget, LLC and Landry’s LLC, and a leader in the gaming, restaurant, hospitality, and sports entertainment industry.
The deal of Golden Nugget Online Gaming will deliver significant strategic benefits to DraftKings as well as expected synergies of $300 million at maturity. And DraftKings will deploy a multi-brand strategy that will enhance cross-sell opportunities and drive increased market share and revenue growth. Plus there will be multiple channels for cost savings by 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 G&A costs such as duplicative corporate overhead.
The commercial deal is also going to 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. And the all-stock deal preserves DraftKings’ balance sheet and aligns the long-term interests of both brands and shareholders.
DraftKings expects to see revenue uplift from additional cross-promotion opportunities — which will expand their customer base by engaging a loyal iGaming-first customer. And there are anticipated revenue synergies through potential technology and game expansion, including Live Dealer offerings.
By bringing Golden Nugget Online Gaming onto DraftKings’ in-house technology, DraftKings is expecting to eliminate current Golden Nugget Online Gaming’s third-party platform costs, reducing operating expenses and vendor costs. And DraftKings’ technology-first approach will drive product enhancement through expanded offerings, including in-house live dealer, and an improved consumer-driven experience.
By streamlining marketing strategies and efforts between the two brands, DraftKings is expecting to realize a higher return on investment. And the agreement provides DraftKings new opportunities to deeply integrate with Fertitta Entertainment, Inc. and market to existing Golden Nugget customers through cross-selling products, in retail sportsbooks and across Fertitta Entertainment assets. Plus DraftKings customers will also have access to new VIP and promotional opportunities, including the ability to purchase discounted rewards and secure reservations using the DraftKings VIP rewards program, subject to a pricing agreement to be determined.
In connection with the deal, DraftKings has also reached an agreement regarding a separate commercial deal with Fertitta Entertainment across its asset portfolio, including the Houston Rockets, Golden Nugget, LLC and Landry’s LLC. The commercial deal will include marketing integrations, sponsorship assets with the Houston Rockets, an expanded retail sportsbook presence, and the optionality to obtain market access on favorable terms through certain Golden Nugget casinos. And 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.
As part of the deal, DraftKings will undergo a holding company reorganization and form a new holding company New DraftKings — which will become the going-forward public company for both DraftKings and GNOG. And the new DraftKings will be renamed DraftKings Inc. at closing (New DraftKings).
Under the terms of the merger agreement , Golden Nugget Online Gaming stockholders would 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 on the record date (the Exchange Ratio). And Tilman Fertitta — who owns beneficially approximately 46% of the equity in GNOG — 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.
The Board of Directors of Golden Nugget Online Gaming (the GNOG Board), acting upon the unanimous recommendation of a committee of independent and disinterested directors established by the GNOG Board (the Special Committee), approved the merger agreement and the transaction, and resolved to recommend Golden Nugget Online Gaming’s stockholders vote to approve the Merger Agreement and the transaction.
The Board of Directors of DraftKings also approved the transaction.
The deal is subject to approval by Golden Nugget Online Gaming stockholders, the receipt of required regulatory approvals and other customary closing conditions and is expected to close in the first quarter of 2022. And the approval of the transaction by Golden Nugget Online Gaming stockholders is expected to be obtained through a written consent to be provided by Tilman Fertitta.
“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.”
— Jason Robins, DraftKings’ CEO and Chairman of the Board
“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. 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.”
— Tilman Fertitta, Chairman and CEO of GNOG