DraftKings has agreed to acquire 100% of Golden Nugget Online Gaming (GNOG) from Fertitta Entertainment, Inc in a $1.56bn all-stock deal that will see Tilman Fertitta join the DraftKings board.
DraftKings will pay 0.365 newly issued shares for each common share of Golden Nugget Online Gaming.
GNOG’s chairman, chief executive and largest shareholder, Tilman Fertitta, who owns approximately 46% of the business, has agreed to continue to hold the DraftKings shares he will receive – worth more than $700m – for at least a year.
Fertitta – who will continue to own the Golden Nugget land-based business – will also join the DraftKings board.
GNOG’s shareholders will be required to vote on the transaction, which has already been unanimously approved by its board. Given Fertitta’s voting rights, however, an affirmative vote is expected.
Subject to regulatory approvals, the deal is expected to close in the first quarter of 2022.
GNOG was spun off from the land-based Golden Nugget business through a special purpose acquisition company (SPAC) merger last year. At the time, the deal valued GNOG at approximately $745m.
“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,” said Jason Robins, DraftKings’ CEO and Chairman of the Board.
“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.”
Feritta said the deal would take advantage of the remainder of his assets, such as Golden Nugget’s land-based player database.
“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,” he said. “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.”
Last week, DraftKings upped its earnings guidance again after reporting its half-year financial results, with revenue coming to $609.8m. The business also revealed that it had been the subject of an SEC subpoena over allegations raised in a report by short-sellers Hindenberg Research. These report had alleged that DraftKings’ B2B arm, SBTech, was still active in black markets.
In 2020, GNOG reported revenue of between $101.0m and $102.0m, up 65.8% year-on-year.
In analysing the deal, Regulus Partners said it was unusually good value for both parties given the current state of transactions in the US market.
“The underlying profitability of GNOG’s igaming footprint, with its leading share in NJ, is a welcome boost to the DK business model, which is not yet achieving much if any operational gearing,” Regulus said.
“GNOG’s operational online gaming expertise is also fertile ground for DK synergies, while a multi-brand strategy is likely to make increasing sense in a maturing and therefore segmenting market, in our view. Finally, since the deal is all paper, the transaction does not put any further hard-earned capital at risk, while GNOG is very easily accretive to DK at both the valuation and cash flow level.
“Not many deals are genuinely win-win and very few US-led transactions currently seem all that sensible; this one ticks both boxes for us. It is nice to be able to write something positive for a change.”