In a move that’s set to reshape the digital lottery and gaming industry, DraftKings has announced its plan to acquire the popular lottery app Jackpocket for a whopping $750 million. This strategic acquisition marks a significant milestone for DraftKings, a company already known for its prowess in sports betting and online gaming, as it ventures into the lucrative US lottery segment.
Financial Insights and Strategic Benefits
The deal, which is expected to close by the second half of 2024, involves a payment structure comprising approximately 55% in cash ($412.5 million) from DraftKings’ reserves and the remaining 45% in common stock (about $337.5 million). This financial strategy showcases DraftKings’ strong cash position, with the company boasting $1.27 billion in cash assets as revealed in its Q4 earnings call. Notably, this acquisition does not require a capital raise, underscoring DraftKings’ financial health and strategic planning.
From a strategic standpoint, DraftKings aims to leverage Jackpocket’s proprietary technology and strong brand presence to tap into the massive US lottery industry. Jackpocket, recognized for its innovative app that allows users to buy lottery tickets from multiple states, operates in 18 US jurisdictions. Its app’s popularity, being nine times more popular than its competitors based on app downloads, presents a lucrative opportunity for DraftKings to expand its product offerings and enhance customer engagement.
Expected Financial Outcomes
The acquisition is anticipated to generate an additional $340 million in annual revenue for DraftKings, with projections indicating a significant boost in incremental revenue and Adjusted EBITDA by fiscal years 2026 and 2028. These financial projections highlight the potential long-term value and growth opportunities that the Jackpocket acquisition brings to DraftKings, further solidifying its position in the online gaming and sports betting market.
<h2>Leadership and Vision</h2>
The leadership teams of both companies have expressed enthusiasm for the acquisition. Jason Robins, Co-founder and CEO of DraftKings, emphasized the strategic importance of entering the digital lottery vertical, noting the acquisition’s potential to offer customers another engaging product and improve marketing efficiency. On the other hand, Peter Sullivan, CEO of Jackpocket, highlighted the partnership’s value in advancing Jackpocket’s mission to provide a convenient, fun, and responsible way to participate in the lottery. He also pointed out the significant opportunity to expand the digital lottery vertical through DraftKings’ broad footprint and mobile products.
Commitment to Responsible Gaming
Both DraftKings and Jackpocket are committed to promoting safe and responsible play. They are members of the National Council on Problem Gambling (NCPG) and have implemented measures such as spending limits and self-exclusion to encourage responsible gambling. This shared commitment underscores the companies’ dedication to providing a safe and enjoyable gaming experience for their customers.
Regulatory Approvals and Closing Conditions
The merger agreement has been approved by the boards of directors of both companies and Jackpocket’s stockholders. However, the deal is subject to regulatory approvals and other customary closing conditions. With the expected closure by the second half of 2024, the gaming industry eagerly awaits the completion of this transformative acquisition.
In conclusion, DraftKings’ acquisition of Jackpocket for $750 million is a strategic move that positions the company to significantly expand its presence in the US lottery segment. By leveraging Jackpocket’s technology and brand, DraftKings aims to enhance its product offerings, increase customer engagement, and drive substantial revenue growth. As the deal progresses towards closure, the industry watches closely to see how this acquisition will reshape the landscape of digital lottery and gaming.
