DraftKings to buy Golden Nugget Online Gaming for $ 1.56 billion

The wild onslaught of mergers and acquisitions in the gaming industry continued on Monday when DraftKings agreed to acquire Golden Nugget Online Gaming for $ 1.56 billion in stock.

Golden Nugget Online shareholders will receive 0.365 DraftKings shares, putting the offering at a 53% premium over the closing price of Golden Nugget Online shares on Friday.

Shares in Golden Nugget Online rose nearly 48% on the news, while shares in DraftKings were relatively stable after the announcement of the deal. DraftKings has a market capitalization of $ 20.68 billion.

Golden Nugget Online CEO Tilman Fertitta owns 47% of the business, which was formed by spinning off Golden Nugget’s sports games and iGaming operations. The billionaire said he will continue to hold the shares of the new company for at least a year after the deal closes. Fertitta will also join the DraftKings board.

The deal gives DraftKings access to Golden Nugget Online’s 5 million customers, who are trusted online casino players. The gaming industry anticipates that customers who gamble on online casino games will be critical to their future revenue growth. Fertitta, and others, have said that iGaming customers are worth seven times more than a sports betting customer.

On DraftKings’ second quarter earnings call, CEO Jason Robins said iGaming provides an opportunity to diversify the company’s offering beyond sports seasons. However, it has struggled to win customers for its casino gaming platform.

“We definitely feel in the iGaming segment that we do best with people who are sports fans, that we can cross-sell, and we have been working hard to try and extend our brand and extend our reach to non-fan iGaming. sports. audience, “said Robins.

DraftKings anticipates $ 300 million in cost savings from the deal as it brings the platform and technology in-house, lowers fees to third-party vendors, and lowers marketing costs. The company may earn promotional and marketing consideration with Fertitta’s Houston Rockets, Landry’s restaurants and Golden Nugget’s traditional casinos.

“Taking advantage of Fertitta Entertainment’s extensive entertainment offerings and extensive customer database, along with the gigantic DraftKings network, makes this an unbeatable partnership,” Fertitta said in a statement. “Together, we can deliver unmatched value to our combined customer base.”

Selling was the only option for Golden Nugget Online, as it only has a significant market share in New Jersey and “did not have the bottom line to compete,” said a gaming industry analyst who asked to remain anonymous as he did not have the approval. to speak at the register.

DraftKings has been looking to diversify its income beyond fantasy sports and sports betting. It struck deals with sports bars, launched a non-fungible token market, and partnered with data provider Genius Sports. The Genius Sports association brings official NFL data to DraftKings, as well as several other sports and streaming opportunities.

Last week, Penn National Gaming announced plans to acquire Canadian sports media and betting powerhouse The Score.

Even in physical stores, consolidation is the name of the game. Vici Properties announced last week that it is purchasing MGM Growth Properties, in a $ 17.2 billion deal that transforms ownership of land on the Las Vegas Strip.

Economies of scale are important in this increasingly crowded space, said Lloyd Danzig of Sharp Alpha Advisors, a venture capital fund and advisory firm dedicated to the sports betting industry. “Businesses with committed user bases, multi-state market access, or proprietary technology will be ready for acquisition in the next 24 to 36 months.”

It is the consolidation trend that is likely to shape the future of sports betting and iGaming, Danzig said, as sports betting operators become “cornerstones of the broader sports, media and entertainment ecosystems.”

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