DraftKings Signs $1.56B Acquisition Deal with Golden Nugget

Sports betting company DraftKings (DKNG) has entered an all-stock deal worth $1.56 billion to acquire Golden Nugget Online Gaming (GNOG). DraftKings has also signed a commercial agreement with Fertitta Entertainment, Inc., the parent company of the Houston Rockets, Golden Nugget, LLC and Landry’s LLC.

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The transactions are expected to close in the first quarter of 2022, subject to necessary approvals.

With this acquisition, DraftKings’ revenues are expected to increase due to additional cross-promotion opportunities, which is also likely to expand its customer base. Also, revenue synergies are expected through potential technology and game expansion, including Live Dealer offerings.

Moreover, the companies plan to save cost by shifting Golden Nugget’s current technology to DraftKings’ in-house proprietary platform. (See DraftKings stock charts on TipRanks)

The CEO and Chairman of the Board at DraftKings, Jason Robins, said, “This deal creates meaningful synergies such as increased combined company revenues driven by additional cross-sell opportunities, loyalty integrations and tech-driven product expansion as well as technology optimization and greater marketing efficiencies.”

On August 6, DraftKings reported better-than-expected Q2 results on strong growth in revenues and active customers. It also raised the revenue guidance for the year in the range of $1.21 billion to $1.29 billion, up from the initial guidance of $1.05 billion to $1.15 billion.

Following the deal announcement, Needham analyst Bernie McTernan assigned a Buy rating and a price target of $73 to the stock, implying 36.7% upside potential.

The analyst noted, “In DKNG’s long-term guide, they target 30% market access in the US, we view this acquisition as showing confidence in the trajectory for iGaming regulation.”

“The key asset DKNG is acquiring in our view is GNOG’s 5M customer database. This should allow DKNG to use the same playbook that made them a success in OSB, by leveraging their daily fantasy customer base to target likely OSB players. The GNOG customer database should allow DKNG to target likely iGamers,” the analyst added.

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus based on 10 Buys and 5 Holds. The average DraftKings price target of $67.03 implies 28% upside potential.