DraftKings is making an even bigger bet on the business of high-stakes wagers, buying Golden Nugget Online Gaming, another leader in the online casino world, for $1.56 billion.
Shares of Golden Nugget Online Gaming skyrocketed nearly 50% on the news. The company is controlled by Tilman Fertitta, the billionaire owner of the Houston Rockets NBA team.
The high-priced deal is the latest development in the rapid growth of the online gambling world. As more states legalize sports betting as well as online casino games such as poker and blackjack, companies like DraftKings are trying to attract gamblers of all types.
DraftKings, which was trading flat on Monday, is not yet profitable. But the company is growing quickly, with second-quarter revenue surging nearly 300% from a year ago.
DraftKings CEO Jason Robins said in an interview with CNN Business that he thinks buying Golden Nugget Online Gaming will help increase the company’s customer base and “fills a meaningful hole for us.”
The online gaming brand means more to older customers who are more frequent casino visitors and is also more popular with women, Robins said, while the average DraftKings bettor tends to be a younger man.
“The Golden Nugget brand resonates more than DraftKings for the casino audience,” Robins said, adding that DraftKings hopes to encourage Golden Nugget Online Gaming customers to try the company’s core sports betting products.
A “golden” age of gambling
As part of the Golden Nugget deal, DraftKings will also work more closely with other parts of Fertitta’s business empire, which includes the Landry’s restaurant chain and brick and mortar Golden Nugget casinos in Las Vegas and Atlantic City.
DraftKings will now have preferred pricing deals at sportsbooks in the Golden Nugget casinos that will reduce costs to operate sports betting operations there. The company also plans to open a new sportsbook in the Toyota Center, home of Fertitta’s Houston Rockets, if Texas legalizes sports betting and allows teams to operate casinos.
Fertitta, who owns about 46% of Golden Nugget Online Gaming’s stock, has agreed to hold on to new DraftKings shares that will be issued as part of the deal for a minimum of one year following the closing of the merger, which could take place within the next four to six months.
But Robins said Fertitta has told him he plans to be a long-term investor in DraftKings. To that end, Fertitta agreed to an all-stock transaction rather than including cash in the deal.
The validation from Fertitta is a clear positive for DraftKings, which is looking to stand out in an increasingly competitive gambling market.
Penn National Gaming (PENN)-backed Barstool Sports, FanDuel owner Flutter Entertainment (PDYPF) and casino giants MGM Resorts (MGM) and Caesars Entertainment are all making a bigger push to grab market share in the rapidly growing online betting world.
Penn National Gaming reported solid earnings and sales last week and also announced that it plans to buy Score Media & Gaming, a Canadian-based sports app, for about $1.74 billion. Flutter will report its latest results on Tuesday.