DraftKings buys Golden Nugget Online Gaming in $1.56bn deal

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US fantasy sports outfit DraftKings has agreed to acquire Golden Nugget Online Gaming for $1.56bn in an all-stock deal that more than doubles its valuation since it listed via a special purpose acquisition company last year.

The transaction will give DraftKings access to the online casino operator’s more than 5m customers and is expected to yield $300m in synergies, according to the companies.

DraftKings will create a new holding company in which GNOG shareholders will receive 0.365 shares for each common share they own. DraftKings has also agreed a separate commercial deal with Fertitta Entertainment, the parent company of Golden Nugget and basketball team Houston Rockets owned by billionaire Tilman Fertitta.

GNOG shares were up more than 47 per cent after the deal was announced.

Fertitta last year spun off GNOG through a Spac deal with Landcadia Holdings II, in which he served as co-chairman and chief executive, which valued the company at $745m. He still owns approximately 46 per cent of equity in GNOG and has agreed to hold on to DraftKings shares for at least a year after the deal closes. 

Tie-ups between companies targeting the rapidly growing US sports betting market have increased as businesses look for ways to maximise the exposure of their brands while cutting customer acquisition costs.

Several have made deals with media start-ups, such as Penn National’s acquisition of Canadian sports media company Score Media and Gaming for $2bn last week. DraftKings also formed a partnership with AT&T’s sports subsidiary Turner Sports.

Operators with online experience have also become attractive targets for land-based casino companies, with the most rapid growth in sports betting coming from mobile gambling in states where it is legal. In several states, online-only companies have been forced to partner with bricks-and-mortar operators in order to win licences. 

In March, casino company Bally’s said it planned to buy UK-based online betting operator Gamesys in a $2bn deal. MGM is also expected to make a second offer for gambling company Entain — with which it has partnered to create sports betting and online gaming platform BetMGM — after Entain’s board rejected a previous offer valuing it at £8bn.

DraftKings, which began as a fantasy sports outfit before expanding into sports betting services, is considered a prime example of the Spac boom that started late in 2019 and reached record highs between the end of 2020 and early 2021.

DraftKings’ share price has risen more than 200 per cent since it listed in April 2020. Part of its success is due to the rising number of US states relaxing online gambling rules.

The Boston-based company recently said it had been subpoenaed by the Securities and Exchange Commission following allegations made by Hindenburg Research, a short seller, that DraftKings’ technology arm was earning half of its revenues from illegal gambling markets. 

DraftKings said last week it “does not believe, based on currently available information, that the outcome of the proceeding will have a material adverse effect on DraftKings’ financial condition, although the outcome could be material to DraftKings’ operating results for any particular period”.

Last week DraftKings raised its revenue guidance for the full year from a range of $1.05bn-$1.15bn to $1.21bn-$1.29bn.