The news broke on Monday morning via a press release:
“… Landcadia II has entered into a Purchase Agreement to acquire Golden Nugget Online Gaming, Inc. (“GNOG”), a US online real money casino owned by Tilman Fertitta… Landcadia II is a publicly traded special purpose acquisition company co-sponsored by Fertitta Entertainment, Inc. and Jefferies Financial Group Inc.
“The transaction is expected to close in the third quarter of this year. Upon closing, Landcadia II intends to change its name to Golden Nugget Online Gaming, Inc. and its Nasdaq trading symbol to GNOG.”
A lot has been written about DraftKings pivot from DFS to legal online gambling, but the Golden Nugget story is perhaps even more improbable.
History of Golden Nugget Online Gambling
New Jersey’s legal online gambling industry sprang into being on November 21, 2013, with a synchronized launch of online poker and casino sites. Among the 13 entries were some heavy hitters that were expected to dominate, namely Borgata and Caesars, with their well-known European partners, partygaming and 888, respectively.
And that’s how the industry played out for quite a while. Borgata, capitalizing on its brand, was the early market leader, with Caesars’ three-headed Atlantic City monster (Caesar’s, Harrah’s, and Bally’s) in second place, followed by Tropicana, Trump Plaza (Betfair), Trump Taj Mahal (Ultimate Gaming).
Another Atlantic City casino, Golden Nugget, was briefly part of the synchronized launch, but technical difficulties kept them offline for nearly a month. Considering Golden Nugget is one of the smallest (in both size and revenue) casinos in Atlantic City, its early difficulties coupled with its decision to forego online poker and concentrate solely on online casino, a lot of people immediately wrote it off.
That would prove to be a big mistake.
Golden Nugget’s Contrarian Thinking Becomes a Huge Asset
As crazy as this sounds in 2020, ignoring online poker was seen as a huge disadvantage in 2013, but it didn’t take long for Golden Nugget’s point of view to prove correct. It wouldn’t be the last time its contrarian strategies would pay off.
Throughout its existence, the Winter-led company refused to follow conventional wisdom.
While its competitors were concerned about housing a direct competitor, Golden Nugget took in the wayward Betfair casino after its land-based partner, Trump Plaza shuttered its doors. While it’s a separate entity, as the license holder, Golden Nugget gets an undisclosed piece of Betfair’s revenue. The company later brought another high-performing skin on board, Rush Street’s SugarHouse Online Casino.
Another example of Golden Nugget’s forward-thinking approach was live dealer games. After falling victim to the money-sink of online poker, every operator not named Golden Nugget was hesitant to invest in live dealer studios. Golden Nugget took the chance and rode its live-dealer monopoly to the top of the New Jersey online casino revenue chart.
For an even deeper dive into Golden Nugget’s New Jersey online casino dominance, you can read my 2017 column in Global Gaming Business, How David Slew Goliath.
What Does This Mean?
As with all deals of this nature, there’s a lot of particulars we don’t yet know. With that caveat out of the way, let’s hop on board the speculation train.
If the deal goes through, it should open doors for Golden Nugget to gain access to states where it doesn’t operate casinos. That’s welcome news for the entire industry, as it gives local operators another partnership option. That’s important considering the consolidation in the US, which has led to a shallow bench of partners.
Golden Nugget also presents an interesting dichotomy to the other big guns in the US market that primarily focus on sports betting over online casino. At the moment, Golden Nugget takes the opposite approach.
One final thought, as Richard Schuetz pointed out on Twitter, these spin-offs create partitions within companies.
As Schuetz intimates, Caesars has used this strategy to shuffle assets for sales, while also maintaining a good credit line for growing parts of the business by separating them from poor-performing and debt-saddled portions of the company. And with Landry’s restaurant empire hurting from COVID-19 shutdowns, raising cash to grow the online gambling part of the business through the reverse-merger with Landcadia II accomplishes that goal.