On Monday, DraftKings (NASDAQ:DKNG) announced it’s buying Tilman Fertitta’s Golden Nugget Online Gaming (NASDAQ:GNOG) for $1.56 billion in stock. At least one analyst says that’s just the beginning of more mergers and acquisitions activity in the iGaming and regulated sports wagering industries.
In a note to clients today, Oppenheimer analyst Jed Kelly says consolidation in the internet casinos and sports betting spaces is just getting started. He rates DraftKings “outperform” with an $80 price target, implying upside of 56 percent from the Monday close.
For its part, DraftKings is proving to be an acquisitive company. The purchase of Golden Nugget Online is scheduled to close in the first quarter of 2022.
This is the operator’s third announced acquisition over the past several months, and that doesn’t include stakes taken in other firms or new business ventures. In late March, the operator announced the purchase of Vegas Sports Information Network (VSiN), and that was followed up a week later with the acquisition of Blue Ribbon Software, a provider of global jackpot and gamification services for use with jackpot promotions.
Analysts are mostly enthusiastic about the DraftKings/GNOG marriage, noting the suitor is paying favorable terms due to the target’s slumping shares. Not only are immediate revenue efficiencies likely because of the deal, but also that GNOG brings 5.5 million customers to the table that will be integrated into the DraftKings database. Most GNOG clients are casino first players, meaning DraftKings will have opportunities to sell them on sports betting or daily fantasy sports (DFS).
fuboTV, Rush Street Interactive Possible Targets
As Oppenheimer’s Kelly points out, news of the DraftKings/GNOG marriage comes just five days after Penn National Gaming (NASDAQ:PENN) said it’s buying Score Media and Gaming (NASDAQ:SCR) for $2 billion in cash and stock.
With the pace of dealmaking in the online casinos and sports betting industries brisk this month, investors are pondering what companies could be next to be taken out. Kelly offers up two names as potential takeover targets: fuboTV (NYSE:FUBO) and Rush Street Interactive (NYSE:RSI).
fuboTV is a sports-heavy streaming provider angling to bolster its sports wagering footprint and leverage its platform to become a player in the in-game betting market. With a market capitalization of $3.94 billion, the company would be easily digestible for any number of suitors, and speculation surfaced earlier this year that DraftKings could make a streaming acquisition. But that’s just a rumor at this point.
As for Rush Street Interactive, that company is perhaps the most direct competitor to GNOG, and the companies’ trajectories are remarkably similar. Both went public late last year following mergers with special purpose acquisition companies (SPACs) and both stocks slumped. RSI, even with the benefit of a rally on the back of the GNOG takeover news, is off 52 percent from its highs. Its $2.74 billion market value is approachable for an array of potential suitors.
Big Deals Possible, Too
Obviously, DraftKings’ purchase of GNOG doesn’t qualify as “large,” and the same would likely be true of a takeover of RSI. However, it’s possible the industry and investors could be treated to a major takeover before the end of the year.
Rumors continue swirling that MGM Resorts International (NYSE:MGM) will make another run at its BetMGM partner Entain Plc (OTC:GMVHY). MGM saw its $11.06 billion offer for the British bookmaker turned back in January.
However, the Bellagio operator had $9.87 billion in liquidity at the end of the second quarter — a figure not including proceeds from the recently announced sales of Aria and Vdara, and the company’s stake in MGM Growth Properties (NYSE:MGP). With a massive war chest and BetMGM, by the parent company’s estimate, now the second-largest online sports betting platform in the US, MGM may be compelled to make another offer for Entain.
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