• Thu. Sep 16th, 2021

DraftKings/Golden Nugget Deal Attracts Largely Constructive Response from Analysts


Aug 12, 2021

Posted on: August 11, 2021, 01:47h. 
Final up to date on: August 11, 2021, 02:40h.

Todd Shriber Learn Extra

On Monday, DraftKings (NASDAQ:DKNG) introduced the acquisition of on-line on line casino operator Golden Nugget On-line Gaming (NASDAQ:GNOG) for $1.56 billion in fairness.

DraftKings CEO Jason Robins in a 2019 Bloomberg interview. He says firm is getting a “steal” with Golden Nugget On-line. (Picture: Bloomberg)

It’s DraftKings’ largest buy since changing into a freestanding public firm in April 2020. It’s being considered as additional affirmation of the chance set within the web on line casino trade. Already largely bullish on DraftKings, analysts are viewing the deal for Tilman Fertitta’s Golden Nugget On-line in a good mild.
B. Riley analyst David Bain, who doesn’t cowl DraftKings, however does price GNOG, says the transaction fills holes for the suitor.

First, it presents DKNG a extra important iGaming stake and cheaper ahead market entry by way of the popular Golden Nugget deal the place it’s stay with a on line casino,” mentioned Bain. “Additional, we now have argued iGaming is structurally extra worthwhile than on-line sports activities wagering.”

Whereas DraftKings is already a longtime participant within the on-line on line casino house, the trade isn’t simple to interrupt into, as Bain notes, and it’s cost-intensive to organically garner clients, underscoring why mergers and acquisitions within the house are  anticipated to warmth up.
“The transaction ought to fast-forward a wanted iGaming participant base for DKNG the place GNOG is stay — DKNG’s present participant base of youthful males differs materially from iGaming’s extra comparable older/feminine offline slot demographic,” provides the B. Riley analyst.
Doubtlessly Huge Increase to DraftKings Inventory
DraftKings shares has been largely regular this week, ticking modestly larger within the wake of the deal announcement.  GNOG shares soared on Monday, reflecting the 53 % premium the client is paying for the iGaming firm.

Over time, the acquisition may pay important dividends for DraftKings, significantly if the $300 million in anticipated value efficiencies being touted are realized or exceeded. Moreover, GNOG brings a database of 5.5 million rewards membership members to the desk, offering the client with a strong avenue with which to cross-sell sports activities wagering and each day fantasy sports activities (DFS).

Macquarie analyst Chad Beynon says that at maturity, assuming the $300 million in financial savings is realized, the GNOG purchase might be value $5 to $7 on DraftKings’ inventory value.
“We estimate each $10 million in incremental synergies equates to extra accretion of 40 cents a share,” mentioned the analyst. “That mentioned, that is nonetheless a serious iGaming acquisition in an more and more aggressive house at a time when DraftKings was presently yielding excessive teenagers iGaming share and expressed confidence that this was secure.
Most likely Good Deal for DraftKings
DraftKings CEO Jason Robins instructed members of the press Monday that the GNOG buy is a “steal” for his firm, and which may not be hyperbole.
The sportsbook operator is paying for much less of a premium for GNOG than is seen on one other current deal within the house. By Bain’s estimation, GNOG may have ultimately managed 10 % of web on line casino market and been value $27 a share. DraftKings is paying barely greater than $18.
Macquarie’s Beynon says DraftKings has ample motivations for the deal, and the transaction “is a serious constructive” for different iGaming operators.

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