DraftKings Acquires Golden Nugget Online Casino To Increase iGaming Reach
As we predicted in a very recent article related to the battle for market share in the U.S. online gambling market, DraftKings (symbol: DNKG) has announced the acquisition of Golden Nugget Online Gaming, Inc. (symbol: GNOG). The announcement comes on the heels of other industry mergers, including the recent acquisition of William Hill by Caesars International.
Based on the terms of the DraftKings purchase, the company will be paying Golden Nugget shareholders approximately $1.56 billion in an all-stock transaction. That works out to a fixed ratio calculation of 0.365 per share of New DraftKings’ Class A Common Stock.
While Golden Nugget Online Gaming is one of the smaller operators in the U.S. online gambling market, they do have a database of 5 million customers and invaluable name recognition. Adding DraftKings Daily Fantasy Sports and sport betting expertise to Golden Nugget’s experience in the casino realm could make for a potent combination. Part of the acquisition included corporate partnership deals with the Houston Rockets, Golden Nugget, LLC, and Landry’s LLC.
In a press release, Jason Robins, DraftKings’ CEO and Chairman of the Board stated:
“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. 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 concurred when he commented on the value this acquisition will bring to the shareholders of both companies. He firmly believes that the Golden Nugget’s vast entertainment network in combination with DraftKings’ sports betting platform and customer database will make this combination a major player in the U.S. gambling industry for years to come.
The Strategy Moving Forward
While the companies will be combining forces, both brands carry significant weight among U.S. retail and online gamblers. As such, DraftKings plans to adopt a multi-brand strategy that will serve to enhance cross-sell opportunities. That is very much in line with the company’s stated goal of increasing market share and revenue growth.
The overall organization will be able to combine forces to cut costs related to marketing and advertising. This will include the migrating of the Golden Nugget’s customer database to the powerful DraftKings DFS and sports betting platforms. The overall company will also benefit from a reduction in overhead after eliminating duplicated costs.
This may be the start of a renewed push by DraftKings for increased market share in the U.S. market. Their top two competitors are BetMGM and Fanduel.
Fanduel and DraftKings spent several years battling for Daily Fantasy Sports’ market share before jumping into the sports betting market. Currently, Fanduel is the leading U.S. provider in terms of both online customers and revenue from online gambling operations. In fact, they lead by a wide margin. With that said, this acquisition will certainly help to close the gap.
Along with BetMGM, all three of these companies are loaded with cash on their balance sheets. That gives all three companies plenty of leverage to be looking for other acquisitions in the near future. This is an industry that could see cumulative sports betting handle rising to $300 billion annually over the coming years. It’s a solid bet that all three of these companies still feel they have work to do. That’s the nature of this booming industry in America.