The wild wave of mergers and acquisitions in the gaming industry continued Monday as DraftKings agreed to acquire Golden Nugget Online Gaming for $1.56 billion in stock.
Shareholders of Golden Nugget Online will receive 0.365 shares of DraftKings stock, placing the offer at a 53% premium to the closing price of Golden Nugget Online stock on Friday.
Golden Nugget Online shares rose nearly 48% on the news, while DraftKings shares remained relatively flat after the deal’s announcement. DraftKings has a market cap of $20.68 billion.
Tilman Fertitta, CEO of Golden Nugget Online, owns 47% of the company, which was formed by divesting Golden Nugget’s sports gaming and iGaming businesses. The billionaire said he will hold onto 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 expects customers betting on online casino games to be critical to future revenue growth. Fertitta and others have said iGaming customers are worth seven times the value of a sports betting customer.
During DraftKings’ second quarter conference call, CEO Jason Robins said iGaming offers an opportunity to diversify the company’s offerings beyond the sporting seasons. However, it has struggled to gain customers for its casino gaming platform.
“We definitely feel like we’re doing better in the iGaming segment with people who are sports fans, that we can do cross-selling, and we’ve worked hard to expand our brand and expand our reach into the non- sports fan iGaming. audience,” said Robins.
DraftKings expects $300 million in cost savings from the deal as it brings in-house platform and technology, lowers fees to third-party providers and lowers marketing costs. The company will be able to obtain promotional and marketing considerations at Fertitta’s Houston Rockets, Landry’s restaurants and Golden Nugget brick-and-mortar casinos.
“By leveraging Fertitta Entertainment’s broad entertainment offerings and customer base, coupled with DraftKings’ massive network, this is an unbeatable partnership,” Fertitta said in a statement. “Together, we can provide unparalleled value to our combined customer base.”
Selling was the only option for Golden Nugget Online, as it only has significant market share in New Jersey and “didn’t have the balance sheet to compete,” said a game industry analyst who wished to remain anonymous because they lacked endorsement. to speak on the record.
DraftKings has sought to diversify its revenue beyond fantasy sports and sports betting. It has made deals with sports bars, launched a marketplace for non-replaceable tokens and partnered with data provider Genius Sports. The Genius Sports partnership 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 gambling powerhouse The Score.
Even in brick-and-mortar stores, consolidation is the name of the game. Vici Properties announced last week that it is acquiring MGM Growth Properties, in a $17.2 billion deal that will transform landholdings on the Las Vegas Strip.
Economies of scale are important in this increasingly crowded space, says Lloyd Danzig of Sharp Alpha Advisors, a venture capital fund and advisory firm focused on sports betting. “Companies with engaged user groups, multi-state market access, or proprietary technology will be ripe for acquisition in the next 24-36 months.”
It’s the consolidation trend likely to shape the future of sports betting and iGaming, Danzig said, as sports betting operators “become cornerstones of the wider sports, media and entertainment ecosystems.”