DraftKings has reached an agreement to buy the Golden Nugget’s online gaming business in an all-stock deal valued at $1.56 billion.
The acquisition, still subject to the approval of Golden Nugget Online Gaming shareholders, is a huge investment into iGaming. The online casino games are becoming increasingly important for platforms like DraftKings, which sees opportunity beyond just fantasy sports and sports betting.
“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,” DraftKings CEO and chairman Jason Robins said in a statement. “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.”
The market’s immediate reaction to the deal was positive. Golden Nugget Online Gaming jumped as much as 50% in pre-market trading; DraftKings was up 4%.
As part of the deal, DraftKings will form a new holding company (called New DraftKings), which will become the new combined public company for both properties. When the deal closes, that company will be renamed DraftKings.
Current shareholders in Golden Nugget Online Gaming will receive a fixed ratio of 0.365 shares in New Draftkings under the deal. Houston Rockets owner Tilman Fertitta, who owns about 46% of the Golden Nugget online business, will join the DraftKings board and become one of the company’s largest shareholders. He has agreed to a one-year lock-up on his new shares.
While DraftKings has grown into one of the country’s online sports betting leaders, Robins said on a call with investors that the company hadn’t fully broken through with iGaming customers that aren’t into sports. DraftKings’ demographics are mostly male, for example, while the Golden Nugget’s is close to 50-50. The Golden Nugget also has an older demographic, he said.
“So there’s not a whole lot of overlap in where the brand appeals,” he said. He added that the Golden Nugget has a live dealer product that could be included on the DraftKings platform, and that the company will gain market access in places that the Golden Nugget has locations but DraftKings doesn’t.
As an added wrinkle, DraftKings is also signing a commercial partnership with the Rockets and Toyota Center alongside this deal, which includes standard sponsorship signage and hospitality. Robins said on the investor call that there’s “early chatter” that Texas could legalize sports betting a way that grants licenses to franchises (like Arizona did), and that this partnership would give DraftKings market access to America’s second biggest state.
“There was no doubt in the beginning when Jason and I started talking, that I wanted only stock,” Fertitta said in a call with investors. “I want to ride this up with him, and be a part of it… They understand marketing like no one else in the space, and they have built the best platform to truly control all this content.”
For the last few years, the Golden Nugget’s sportsbook has been unable to book Rockets games, due to Fertitta’s ownership of both. That restriction will not apply to DraftKings after this deal closes, Fertitta said.
This is the latest deal in an online gaming space that is undergoing fairly rapid consolidation. Last week Penn National Gaming purchased sportsbook and media company theScore for $2 billion. Earlier this year Caesars Entertainment completed its $4 billion purchase of William Hill.
DraftKings made the announcement just a few days after the company declared second quarter earnings. Both revenue and loss-per-share beat analyst estimates, and the stock posted small gains. As of July 1, the DraftKings offered iGaming products in Michigan, New Jersey, Pennsylvania and West Virginia.
Raine Group served as financial adviser to DraftKings. Jefferies advised Golden Nugget Online Gaming.