The wild wave of mergers and acquisitions in the gaming industry continued on Monday as DraftKings agreed to acquire Golden Nugget Online Gaming for $ 1.56 billion in shares.
Golden Nugget Online shareholders will receive 0.365 DraftKings shares, which places the offer at a 53% premium over the Golden Nugget Online share price closing on Friday.
Golden Nugget Online shares jumped nearly 48% on the news, while DraftKings shares were relatively flat after the deal was announced. DraftKings has a market cap of $ 20.68 billion.
Golden Nugget Online CEO Tilman Fertitta owns 47% of the company, which was formed by the split of the sports games and iGaming business from Golden Nugget. The billionaire said he would continue to hold shares in the new company for at least a year after the deal closes. Fertitta will also join the DraftKings Board of Directors.
The deal gives DraftKings access to Golden Nugget Online’s 5 million customers, who are trusted online casino players. The gaming industry predicts that customers who bet on online casino games will be critical to its future revenue growth. Fertitta and others have said that iGaming customers are worth seven times the value of a sportsbook customer.
On DraftKings’ second quarter earnings conference call, CEO Jason Robins said iGaming offers an opportunity to diversify the company’s offering beyond sporting seasons. However, it has struggled to gain customers on its casino gaming platform.
“We really believe that in the iGaming segment, we do better with sports fans, that we can cross-sell and we have worked hard to try to expand our brand and extend our reach to the non-fan iGaming audience. sport, said Robins.
DraftKings expects $ 300 million in savings from the deal as it brings the platform and technology in-house, cuts third-party vendor fees, and lowers marketing costs. The Company will be able to obtain promotional and marketing considerations with the physical casinos of Fertitta’s Houston Rockets, Landry’s and Golden Nugget’s.
“Taking advantage of Fertitta Entertainment’s vast entertainment offerings and vast customer database, together with DraftKings’ massive network, makes this an unbeatable partnership,” Fertitta said in a statement. “Together, we can provide our combined customer base with unprecedented value.”
Selling was the only option for Golden Nugget Online, as it only has a significant market share in New Jersey and “didn’t have the track record to compete,” said a gaming industry analyst who said. asked to remain anonymous as they did not have approval. to speak officially.
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-fungible tokens, and partnered with data provider Genius Sports. The Genius Sports partnership brings official NFL data to DraftKings, along with various other sports and streaming opportunities.
Last week, Penn National Gaming announced plans to acquire Canadian sports media and sportsbook, The Score.
Even in bricks and mortar, consolidation is the name of the game. Vici Properties announced last week the purchase of MGM Growth Properties, in a $ 17.2 billion deal that transforms land ownership from the Las Vegas Strip.
Economies of scale are important in this increasingly crowded space, said Lloyd Danzig of Sharp Alpha Advisors, a venture capital fund and advisory firm dedicated to the sports betting industry. “Companies with engaged user bases, multi-state market access, or proprietary technology will be ripe for acquisition within the next 24-36 months.”
It is the trend of consolidation that is likely to shape the future of sports betting and iGaming, Danzig said, as sports betting operators become “the cornerstones of the larger sports, media ecosystems. and entertainment “.