DraftKings Inc has entered into a definitive agreement today to acquire Golden Nugget Online Gaming Inc in an all-stock transaction worth circa $1.56bn.
As part of the transaction, the firm 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.
In connection with the acquisition, DraftKings has entered into a commercial agreement with Fertitta Entertainment Inc, the parent company of the Houston Rockets, Golden Nugget LLC and Landry’s LLC.
According to DraftKings, the acquisition will deliver significant strategic benefits combined with expected synergies of $300mm at maturity. The firm said it will deploy a multi-brand strategy to 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. Additionally, the all-stock deal preserves DraftKings’ balance sheet and aligns the long-term interests of both brands and shareholders.
“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.
He added: “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.”
Tilman Fertitta, Chairman and CEO of GNOG: stated: “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.”
DraftKings said in its statement that it projects a revenue uplift from additional cross-promotion opportunities, which will expand its 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, the firm also expects to eliminate current Golden Nugget Online Gaming third-party platform costs, reducing operating expenses and vendor costs. Additionally, DraftKings’ technology-first approach will drive product enhancement through expanded offerings, including in-house live dealer, and an improved consumer-driven experience.
The separate commercial deal with Fertitta Entertainment Inc 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.
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.
Fertitta, who owns beneficially approximately 46% of the equity in GNOG, has agreed to continue to hold the DraftKings shares for a minimum of one year from the closing of the transaction.