DraftKings, a Boston startup that’s become a leader in the burgeoning online sports betting industry, announced Monday that it plans to buy Houston-based Golden Nugget Online Gaming. Valued at $1.56 billion, the all-stock deal will expand DraftKings’ reach beyond just sports betting, and into the larger online casino and gambling arena — otherwise known as “iGaming.”
This news comes on the heels of DraftKings’ earnings call for last quarter, which saw nearly $300 million in revenue for the company. During the call, CEO Jason Robins said iGaming gives the company an opportunity to diversify its offerings beyond the normal sports seasons, but that it has been struggling to get regular online casino players to come to its platform.
“We’ve been working hard to try to extend our brand and extend our reach into the non-sports fan iGaming audience,” Robins explained. “That’s something I think we’ve been getting a bit of traction on, but really need to continue to invest. I think that’s probably the biggest opportunity for us now in terms of consumer segments that we’re just not penetrating at the moment.”
In a later statement, Robins added that this acquisition means DraftKings will get access to the 5 million “iGaming first” customers that play Golden Nugget’s casinos regularly, and will be able offer new product expansions and “loyalty integrations” for them. The deal also means DraftKings has entered into a commercial agreement with Fertitta Entertainment, a conglomerate owned by billionaire businessman Tilman Fertitta that serves as a parent company to Golden Nugget, as well as the Houston Rockets basketball team and Landry’s LLC, a leader in the gaming, sports entertainment and hospitality industries.
In its press release, DraftKings says it anticipates $300 million in cost savings from this deal as it brings platform technology in house, cuts fees to third-party providers and lowers future marketing costs. The company will also be able to get promotional and marketing consideration with all Golden Nugget brick-and-mortar casinos, Landry’s restaurants and the Houston Rockets.
Meanwhile, Golden Nugget’s shareholders will receive 0.365 shares of DraftKings stock, and Tilman Fertitta, who owns about 46 percent of Golden Nugget, will continue to hold onto the stock for at least a year after the deal closes, which is expected to happen in the first quarter of 2022. Fertitta will also join DraftKings’ board of directors.
“This is a strong commercial agreement for both companies,” Fertitta said in a statement. “Leveraging Fertitta Entertainment’s broad entertainment offerings and extensive customer database, coupled with DraftKings’ mammoth network makes this an unbeatable partnership. Together, we can offer value to our combined customer base that is unparalleled.”
This is not DraftKings’ first attempt to expand beyond traditional sports wagering. About a month after the company made its initial public offering in April 2020, it unveiled a swath of new content to keep users engaged amid the pandemic, when many sports were put on a months-long hiatus. This included fantasy sports and betting on video games like Counter Strike and Rocket League, as well as free-to-play games around reality shows like Survivor and Top Chef. The company also partnered up with MLB for a new MLB Dream Bracket game and Bundesliga, one of Germany’s most popular soccer leagues, to live-stream their games.
Now, this acquisition of Golden Nugget will give DraftKings renewed access to the world of iGaming, an industry that is predicted to soar in the next few years in the United States as it becomes legal in more and more states.
