DraftKings to acquire Golden Nugget Online Gaming in a $1.56B deal

DraftKings on Monday announced that it has entered into a definitive agreement to acquire Golden Nugget Online Gaming in an all-stock transaction that has an implied equity value of nearly $1.56 billion.

The commercial agreement, which involves Golden Nugget’s iGaming product and existing combined database of more than 5 million customers, was made with Fertitta Entertainment, Inc., the parent company of the Houston Rockets, Golden Nugget and Landry’s. 

DraftKings has also reached an agreement regarding a separate commercial deal with Fertitta Entertainment across its asset portfolio, including the Houston Rockets, Golden Nugget and Landry’s. The commercial agreement 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. 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.

The Board of Directors of both companies already approved the transaction, which 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.

“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.”

“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. “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.”

The acquisition of Golden Nugget Online Gaming is expected to bring synergies of $300mm at maturity. DraftKings said it will deploy a multi-brand strategy that will enhance cross-sell opportunities and drive increased market share and revenue growth. In addition, there will be multiple channels for cost savings by, among other things, 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 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. Additionally, the all-stock deal preserves DraftKings’ balance sheet and aligns the long-term interests of both brands and shareholders.

In addition, DraftKings expects to see revenue uplift from additional cross-promotion opportunities, which will expand the company’s customer base by engaging a loyal iGaming-first customer. Additionally, 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 expects to eliminate current Golden Nugget Online Gaming’s third-party platform costs, reducing operating expenses and vendor costs. Also, 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 expects to realize a higher return on investment. The agreement also provides DraftKings new opportunities to deeply integrate with Fertitta Entertainment and market to existing Golden Nugget customers through cross-selling products, in retail sportsbooks and across Fertitta's assets. 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.

As part of the transaction, 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. New DraftKings will be renamed DraftKings Inc. at closing.

Under the terms of the merger agreement entered into on August 9, 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. 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 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.