DraftKings Makes Texas-Sized iGaming Push With $1.5B Golden Nugget Deal

“We’ve made some progress but have not yet deeply penetrated the very large audience that is non-sports fan iGamers,” DraftKings chief executive Jason Robins says.

DraftKings Inc. is making a push for more market share in internet casino gambling by buying Golden Nugget Online Gaming Inc., a deal that may, someday, also offer a path to accessing the great untapped sports betting market of Texas. 

The approximately $1.56-billion all-stock deal was announced Monday morning, with Golden Nugget Online Gaming (GNOG) shareholders to get 0.365 shares of common stock in a new DraftKings holding company for each of their GNOG shares. 

Houston-headquartered GNOG is an online gaming and sports betting company currently operating in New Jersey and Michigan. In addition to that, the company boasts ties to the NBA’s Houston Rockets and casino chain Golden Nugget LLC.

For Boston-based DraftKings, the deal would hand them a well-known name in the gambling industry, as well as secure GNOG’s database of more than five million customers.

Yet the most attractive part of the deal may be the opportunity GNOG provides to reach customers a bit more diverse than the young, male, sports-loving demographic DraftKings already serves in bulk. GNOG, for instance, offers iGaming with live, flesh-and-blood dealers, instead of just numbers on a screen, which could attract a broader gambling audience. 

“We’ve made some progress but have not yet deeply penetrated the very large audience that is non-sports fan iGamers,” DraftKings chief executive Jason Robins said during a conference call on Monday. “Really, we believe this will help us to attain much greater iGaming market share over the long term, including being more efficient with marketing and having tremendous synergies both on the cost and revenue side.” 

The acquisition requires approval by Golden Nugget Online Gaming shareholders and regulators, but the companies anticipate the deal closing in the first quarter of 2022. DraftKings plans on using a “multi-brand strategy” going forward and will create a new holding company under which those brands will operate. 

Lone Star State ambitions

There are, however, a few other benefits of DraftKings buying GNOG. In particular, the deal comes with a commercial agreement with Fertitta Entertainment Inc., the holding company of billionaire and GNOG CEO Tilman Fertitta, and the parent company of the Rockets, Golden Nugget, and restaurant chain Landry’s LLC. 

Further down the road, then, the transaction could give DraftKings an edge in obtaining access to a legal sports betting market in Texas. That market doesn’t exist yet, because Texas hasn’t legalized sports betting, but lawmakers in the Lone Star State have been pushing harder on the issue of late. 

The commercial deal provides various marketing opportunities, and DraftKings will become the exclusive daily fantasy sports, sports betting, and iGaming partner of the Rockets. Moreover, DraftKings says it plans on opening a sportsbook at the Toyota Center, the Rockets’ home, if and when that becomes possible. 

“While it is certainly TBD, there is early chatter that if and when Texas legalizes sports betting, the Rockets would receive a license,” Robins said. “And this agreement provides for both a physical sportsbook at the arena, as well as online market access in the event that Texas legalizes and provides access to the teams for mobile and for physical sportsbooks.”

‘They’re the Coca-Cola of this industry’

Fertitta, who currently owns around 46 percent of GNOG’s stock, will be joining DraftKings’ board of directors. According to a release, Fertitta plans on holding his shares of the company for at least one year when the deal closes. 

The combined DraftKings-GNOG firm will put Fertitta’s Golden Nugget brand to use, too. For example, Robins noted during the conference call that they will be rebranding retail sportsbooks as DraftKings in Golden Nugget casinos.

DraftKings’ acquisition also follows the recent announcement of rival Penn National Gaming Inc., the owner of the Barstool Sportsbook app, buying Toronto-based Score Media and Gaming Inc. Monday’s deal could signal more mergers and acquisitions as competition continues to ramp up in the legal sports betting industry. 

“They’re the Coca-Cola of this industry,” Fertitta said of DraftKings during Monday’s conference call. “There’s going to be a lot of consolidation in this space in the next few years and we want to be a part of the winner.”

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