The rate at which acquisitions and mergers are happening is an indication that the wave might go on for a long time. The latest announcement in this regard revealed that DraftKings bought Golden Nugget Online Gaming (GNOG) stocks valued at $1.5 billion. This purchase makes DraftKings the majority shareholder of GNOG and therefore transfers governing rights.
The deal agreement features Fertitta Entertainment Inc. which is the mother company of Golden Nugget. Other business functions that fall under Fertitta are the NBA’s Houston Rockets and Landry’s chain of restaurants.
The history of Golden Nugget as a casino gaming market leader dates back to 2013 at the time when New Jersey was issued with a casino gambling license. Of late the top position has been held by Borgata Casino, which has a much larger physical casino establishment. Golden Nugget however does better on online casino operations compared to Borgata.
A large number of people who visit the Golden Nugget gaming site are there for the live dealer table games experience. This gaming section has been quite instrumental in attracting online bettors to the Golden Nugget web offering. In a statement which DraftKings issued at the time of purchasing the GNOG shares, the buyer indicated that live gaming was among the products that they are hoping to enhance with the agreement.
The CEO of DraftKings, Jason Robins went on to say that his company was looking forward to mutual benefits which include wider customer reach and leveraging on an already existing customer base. Since the two companies are involved in more or less the same products, Robins is optimistic that they will both grow their revenues, cut costs in cross marketing campaigns, build loyal integrations and optimize emerging technologies.
A major challenge that has perpetually faced companies that operate in the mobile sports betting market is a low return on investment. With an average ROI of 5%, this area of gambling has proven hard to sustain. On the flipside, it is a fact that there is an exodus of customers, especially after the Covid-19 pandemic struck, that are now loyal online casino players.
Despite the fact that online casinos are now leading in revenue generated compared to the traditional casino model, not much is said about them in the media. In the first 6 months of 2021 for instance, New Jersey gambling market reported $368.3 million collected revenue from sports betting compared to $1.11 billion collected as revenue from online casino bets.
According to Tilman Fertitta, who is the CEO and Chairman of GNOG, the coming together of two of the industry’s leading performers can only result in more value for the shareholders. The two companies already operate in an unparalleled fashion and this recent merger is meant to further strengthen their position in the market.
What we cover
What does the agreement mean?
Top managers from DraftKings and Fertitta Entertainment have already identified areas in which both companies will be spending less due to their collaboration. One of the major expected changes which is in itself a major move is the migration of GNOG technology to the DraftKings platform. DraftKings is one of the few betting giants that have opted to work with an in-house technology team instead of an outsourced team like many other platforms do.
Another area in which the two companies will benefit mutually is advertising – ideally, the same marketing team will handle material for both companies and the development costs will definitely be cumulatively low. This will apply to corporate running expenses as well.
The announcement also touched on the fact that the deal was going to affect market access rates for DraftKings. If GNOG and DraftKings sat together to set preferred prices for their offerings, it would mean less competition between them.
Considering the fact that Texas is a static gaming environment, the press statement given on the acquisition was quite optimistic. DraftKings has been mentioned as the exclusive sports betting, iGaming and DFS partner for the Houston Rockets. The company also has plans to set up a retail sportsbook at the Texas Toyota Center as soon as it is legalized and approved.
DraftKings is also planning to adopt a new identity, “New DraftKings” in its new status as a holding company. This new formation will act as the public entity that will house GNOG and DraftKings.
For the shareholders of Golden Nugget Online Gaming, the current reorganization will see them receiving New DraftKings’ Class A common stock at a fixed ratio of 0.365 for every individual GNOG common share they hold. Fertitta’s shares in GNOG are nearly 50%; he will hold on to DraftKings shares that will be issued to him as per the conditions of the merger for at least 1 year after the deal has been finalized.
What are the expected timelines?
Although the stock money from DraftKings has already changed hands, the transaction will only be deemed to be complete if the stockholders of Golden Nugget Online Gaming approve of it. This will then be followed by the awarding of necessary approvals by the state regulators. According to company officials who are actively involved in the transaction, the entire process should be complete by the end of the first quarter of 2022.
Conclusion
For gambling enthusiasts in Illinois, Colorado, Iowa, Indiana, New Hampshire, Mississippi, New York, Tennessee, Virginia, Oregon, New Jersey and West Virginia, the DraftKings products can be accessed through a mobile app. For those who still find the idea of social betting thrilling, these same locations have retail betting outlets. DraftKings has also partnered with the UFC, PGA TOUR, NASCAR, MLB, NFL as the official DFS partner. Are you eager to experience traditional casino gaming like it happens in Las Vegas? Well, there will be multiple locations affiliated to DraftKings and GNOG around the country; for GNOG, you can find them in Mississippi, Louisiana, Atlantic City and Las Vegas.
