DraftKings (DKNG) to Acquire Tilman Fertitta's Golden Nugget Online Gaming (GNOG) For $1.56B in Stock, Seen as a Positive Move for Both DKNG and Rush Street Interactive (RSI)

DraftKings (NASDAQ: DKNG) announced today a deal to acquire Tilman Fertitta's Golden Nugget Online Gaming, Inc. (Nasdaq: GNOG) in an all-stock transaction valued at $1.56 billion.

With this transaction, DKNG will leverage GNOG’s iGaming product experience and database of over 5 million customers. The company projects to have synergies of $300 million.

“Our acquisition of Golden Nugget Online Gaming, a brand synonymous with iGaming and entertainment, will enhance our ability to instantly reach a broader consumer base, including Golden Nugget’s loyal ‘iGaming-first’ customers,” said Jason Robins, DraftKings’ CEO and Chairman of the Board.

Bernie McTernan, an analyst at Needham & Company, expects the acquisition of GNOG to positively fuel DKNG’s data science engine.

“While it is early days in the iGaming industry, the market share data shows that omnichannel and related customer database is a valuable tool for driving share which has helped to drive market share among the leaders for MGM in Michigan, RSI in PA and GNOG in NJ. Similar to the success DKNG has had with driving market share in OSB through its DFS customer database, DKNG likely sees the potential that the GNOG customer data (5M people) is worth more in their hands, a component of the $300M of synergies they expect to achieve over time. At their investor day in March, DKNG provided guidance they expect to achieve 15-20% market share in the US. Every additional 5% market share gains relative to their guide is worth $700M of revenue,” the analyst wrote in a client note.

In addition to seeing positive for DKNG, McTernan also believes the GNOG acquisition is a positive for Rush Street Interactive (NYSE: RSI) as it shows the value in reaching the core iGaming audience.

‘The demographics for core OSB players is different from iGaming. This transaction highlights the value in B2C brands focused on reaching the core iGaming audience. Therefore, we believe a positive for RSI. The $1.56B purchase price for GNOG represents 7.5x consensus revenue for '22, relative to RSI trading at 3.6x. Using the GNOG transaction multiple for RSI implies a $21 equity value per share,” the analyst adds.

The GNOG acquisition comes just a few days after Penn National Gaming (NASDAQ: PENN) acquired Score Media and Gaming (NASDAQ: SCR) for $2 billion in cash and stock, suggesting increased consolidation in the online sports betting industry.

Shares of DKNG are down 0.4% in today’s trading session.

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