Why DraftKings Deal for Golden Nugget Could Be a Huge Winner

Casinos & Hotels

Published: August 9, 2021 9:47 am

Since coming public in late December in a SPAC deal, Golden Nugget Online Gaming Inc. (NASDAQ: GNOG) has lost about 46% of its value. Until, that is, Monday morning when DraftKings Inc. (NASDAQ: DKNG) agreed to acquire the company for about $18.43 a share, a premium of 50% Golden Nugget’s Friday closing price of $12.27.

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The acquisition price is still lower than the opening price of $24.39 for Golden Nugget stock on its first day of trading. In the March quarter, Golden Nugget posted a diluted per-share loss of $0.15. June-quarter results have not yet been released.

So, the deal has something for everyone. Tilman Fertitta, board chair and CEO of Golden Nugget, said, “This transaction will add great value to the shareholders as two market leaders merge into a leading global player in digital sports, entertainment and online gaming.” Fertitta owns a 46% stake in Golden Nugget, and Monday morning’s announcement included a statement that he has agreed to hold onto the DraftKings stock he receives in the merger for at least one year from the closing date of the transaction.

The DraftKings board chair and chief executive, Jason Roberts, commented, “We look forward to Tilman being an active member of our Board and one of our largest shareholders.”

Along with the acquisition, DraftKings has reached an agreement with Fertitta Entertainment, which owns the Houston Rockets NBA team, Golden Nugget and Landry’s to “include marketing integrations, sponsorship assets with the Houston Rockets, an expanded retail sportsbook presence, and the optionality to obtain market access on favorable terms through certain Golden Nugget casinos. DraftKings will also become the exclusive daily fantasy sports, sports betting, and iGaming partner of the Houston Rockets and intends to open a sportsbook at the Toyota Center, pending state legalization and regulatory approvals.”

Golden Nugget shareholders will receive a fixed ratio of 0.365 shares of DraftKings stock for each Golden Nugget share they own. DraftKings’ board of directors has approved the transaction and Golden Nugget’s approval “is expected to be obtained through a written consent to be provided by Tilman Fertitta.” The transaction is expected to close in the first quarter of 2022 pending regulatory approval and completion of other closing conditions.

The deal does bring Golden Nugget’s iGaming platform under the DraftKings tent and eliminates a competitor in the online gaming business. The deal seems like a winner all around.

Golden Nugget stock traded up about 46% early Monday to $17.91. The stock’s 52-week range is $10.10 to $27.18, and its market cap at Friday’s closing price was $957.8 million. The company’s enterprise value was $936.55 million.

At last look, DraftKings stock was up only fractionally to $51.70, in a 52-week range of $30.51 to $74.38. The company’s market cap was $20.72 billion at Friday’s closing price of $51.59. and its enterprise value was $19.23 billion.