Who Is DraftKings Targeting With $1.5 Billion Golden Nugget Online Purchase?

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DraftKings is acquiring Golden Nugget Online Gaming (GNOG) in a bid to beef up its online gaming presence.

DraftKings said Monday it was paying $1.56 billion for GNOG in an all-stock deal. The deal is expected to close in the first half of 2022.

The deal covers the online gambling assets of Golden Nugget, which were spun out and listed as as separate business last year.

It also covers a database of around 5.5 million Golden Nugget customers across online and retail.

What’s in it for DraftKings?

DraftKings CEO Jason Robins said the deal helped DraftKings reach iGaming customers who do not necessarily bet on sports.

“We are very good at cross-selling sports customers into iGaming, but our database is mainly male and focused on sports,” Robins said. “GNOG’s database is nearly 50/50 male to female and more of that casino clientele,” Robins said.

DraftKings will retain the Golden Nugget online casino brand and run a multi-brand strategy.

Synergy energy

Robins said the two companies expect $300 million in synergies at maturity. 

That includes:

Big name joins DraftKings board

Tilman Fertitta, who owns 45% of GNOG, will join the operator’s board following the transaction. He will also become one of the largest DraftKings shareholders when the deal closes. 

Fertitta said he was excited to become a shareholder in the “clear leader” in online sports betting.

“DraftKings is the Coca-Cola of the space,” Fertitta said. “I wanted only stock. I wanted to ride this thing all the way up with these guys. This is the best management team in the space.”

Fertitta agreed to hold his DKNG shares for at least one year after the transaction closes. With GNOG now owned by DraftKings rather than Fertitta, Golden Nugget online sportsbooks can now take bets on NBA again.

It was forbidden in various states because Fertitta also owned the Houston Rockets.

Details of the transaction

GNOG shareholders receive 0.365 shares of $DKNG stock for each share of GNOG. That is the equivalent of c.$18.70 per $GNOG share, and around a 51% upside from last close.

Golden Nugget online operations will be migrated onto the DraftKings platform to cut third-party costs. It currently runs on the SG Digital platform.

GNOG is the largest online casino brand in NJ.

DraftKings partners with rest of Golden Nugget too

As part of the transaction, DraftKings reached a separate commercial deal with Fertitta Entertainment, covering the Houston Rockets, Landry’s and the Golden Nugget casino portfolio.

Under that deal:

Robins said DraftKings’ expanded retail footprint would help with hospitality for high value customers.

How did the market react?

DKNG stock initially jumped around 5% in pre-market trading, but gave up most of those gains at the time of writing.

Regulus Partners said the multi-brand strategy made “increasing sense” in a maturing market.

The analyst firm added: “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.”

Analysts are on board

Likewise, Eilers & Krejcik said in a note there was a “lot to like” about the deal.

Specifically, Eilers said it would help DraftKings protect its igaming share in the face of mounting competition.

“We see this pairing as a longer term defensive hedge against the ascendancy of BetMGM, Caesars, and even Penn National, which has barely begun to scratch the surface of its online casino capabilities,” the analysts said.

DK has had a busy couple of days with Q2 results on Friday, which also revealed an ongoing SEC investigation into its SBTech acquisition.