DraftKings Inc (NASDAQ: DKNG) will acquire Golden Nugget Online Gaming Inc (NASDAQ: GNOG) for roughly $1.56 billion in stock, the sports betting company said in an announcement on Monday.
Details of the agreement
DraftKings will now set up a new holding company it is calling “New DraftKings” – a public firm comprising of both DraftKings and Golden Nugget. Following the completion of the transaction that is expected in the first quarter of 2022, DraftKings will get to benefit from the online gaming firm’s years of experience in iGaming and a user base of over 5 million.
The agreement between the two companies translates to 0.365 shares of New DraftKings for Golden Nugget stockholders. Golden Nugget is owned by American billionaire Tilman Fertitta’s conglomerate and holding company, Fertitta Entertainment Inc.
The news comes only days after DraftKings reported market-beating results for its fiscal second quarter. The Golden Nugget acquisition was in line with CEO Jason Robin’s comments on the earnings call that iGaming is a more lucrative customer base than sports betting, but DraftKings has so far lagged in expanding its footprint in this niche.
Analysts: it was the only option for Golden Nugget
DraftKings also expects the deal to results in $300 million worth of cost savings. Reporting on the announced acquisition, CNBC’s Contessa Brewer said on “Squawk Box”:
“Analysts tell me this was the only option for Golden Nugget since it only has a significant market share in New Jersey and doesn’t have the balance sheet to compete elsewhere. The deal also gives DraftKings a foothold in Houston Rockets, Landry’s, and Gold Nuggets’ bricks and mortar business – a great promotional opportunity.”
Shares of Golden Nugget jumped roughly 50% on Monday morning, while DraftKings was down about 2.0% on the intraday chart.
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