{"id":1723,"date":"2021-08-09T09:47:01","date_gmt":"2021-08-09T16:47:01","guid":{"rendered":"https:\/\/wagers.com\/staging\/4285\/?p=1723"},"modified":"2021-11-03T09:50:13","modified_gmt":"2021-11-03T16:50:13","slug":"draftkings-digs-deep-for-golden-nugget","status":"publish","type":"post","link":"https:\/\/wagers.com\/staging\/4285\/news\/draftkings-digs-deep-for-golden-nugget\/","title":{"rendered":"DraftKings digs deep for Golden Nugget"},"content":{"rendered":"

DraftKings acquires Golden Nugget Online Gaming<\/h3>\n

A rich seam:<\/strong> DraftKings acquires Golden Nugget Online Gaming in an all-stock transaction valuing GNOG at approximately $1.56bn. The offer is at a 7.6x multiple on 2022E revenue and is a 51% premium on GNOG\u2019s closing price on 6 August. GNOG will own 6.6% of DraftKings going forward. The transaction is due to close Q1 2022. In prepared remarks (no Q&A), DraftKings CEO Jason Robins was clear about the rationale for the acquisition of GNOG. \u201cDraftKings has done a tremendous job to become an iconic sports betting brand and has been great at cross-selling into igaming, but it has not yet reached non-sports fans who are igaming customers.\u201d He added that DraftKings has a \u201cmainly male clientele\u201d and the acquisition will diversify the user base and enable it to access GNOG\u2019s 50% female customer base.<\/p>\n

\u201cWe\u2019ve achieved top three in states where we are active, but there is a substantial segment that is not into sports but highly active in igaming: it\u2019s a tremendous opportunity to broaden demographics and deepen market share.\u201d<\/em><\/p><\/blockquote>\n

Tied in:<\/strong> The agreement means GNOG is now one of the largest DraftKings shareholders. GNOG chairman and CEO Tilman Fertitta said the group \u201cwanted only stock\u201d when discussing the transaction, \u201cto drive up the value, be part of a winner and something bigger.\u201d<\/p>\n

\u201cWe want to be market-leader, the brand in the industry and build the best platform in the space,\u201d Fertitta added.<\/em><\/p><\/blockquote>\n

Robins added that the all-stock deal \u201cpreserves our very strong balance sheet, means no debt and shows the excitement GNOG and Tilman have for the combined company.\u201d<\/p>\n

Live and direct: <\/strong>Being able to incorporate and leverage GNOG\u2019s live dealer\/igaming offering was another key factor in driving the acquisition. GNOG has developed its live dealer studios since 2015 and its live offering has made it one of the leaders in icasino. Golden Nugget\u2019s land-based casino estate was another. Robins said it had been \u201cvery difficult for DraftKings to break through without a brick-and-mortar presence\u201d and coordinating GNOG\u2019s 5m-strong database and rewards program with DraftKings\u2019 own across GN casinos, Landry\u2019s restaurant chain and as part of the Houston Rockets NBA franchise belonging to GNOG owner Tilman Fertitta will maximize marketing efficiencies and create synergies of $300m at maturity.<\/p>\n

The big kick-off: <\/strong>Ahead of the news this morning, analysts were last week digesting the company\u2019s Q2 results where beat and raise should be the mantra after the company once again came out with forecast-busting numbers with the guidance for 2021 now at between $1.21-1.25bn or 14% up at midpoint on the previous target. But losses for H2 are also scaling up; Deutsche Bank are forecasting yearly EBITDA losses of up to $590m. It\u2019s indicative of how the market is set to heat in the coming weeks.<\/p>\n

\u201cWe expect the 3Q21\/4Q21 periods to be the most competitive the OSB arena has experienced to date, with two large scale casino operators poised to spend considerably, as they make their respective entrances, in a dedicated fashion, into the space.\u201d<\/em><\/p><\/blockquote>\n

Stand and deliver:<\/strong> DB suggest the ability to grab or retain market share will be the key differentiator during the coming NFL season and that DraftKings\u2019 relatively conservative forecasts are \u201cperhaps allowing for the potential for share losses as new entrants roll out.\u201d Macquarie noted that using a calculation of market share vs market cap, DraftKings\u2019 current valuation implies market share of 30%. The challenge presented by Caesars, Penn National and MGM means DraftKings\u2019 retention tools \u201cwill be put to the test\u201d. Meanwhile, the marketing pressure is already telling; DB noted that DK will be \u201cincorporating\u2019 a small element of nationwide spend this NFL season. But at least it has the spare change; at quarter end it had $2.6bn of cash on the balance sheet.<\/p>\n

Asia no more: <\/strong>Alongside the notification of a subpoena from the SEC to explain itself in light of the content of the attack from the short-seller Hindenburg, DraftKings also said in its 10-Q that the Asian reseller relationship at the centre of many of the allegations had come to an end. Recall, this Asian reseller – named as BTI\/Coretech by Hindenburg – was accused of being a front entity for DraftKings\u2019 \u201cundisclosed illegal gaming division.\u201d The question now is whether the severing of ties is enough for the SEC.<\/p>\n

Additional articles available today at Earnings + More:<\/h3>\n