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Reverse merger

Golden Nugget announced on Monday that it will taking its online gambling business unit, Golden Nugget Online Gaming, Inc. (GNOG), public. Once the process comes to fruition, GNOG will become the second “pure” online casino company, as the announcement put it, to be publicly traded. GAN was the first, going public in early May.

The way Golden Nugget is going about this is a little “inside baseball,” so bear with me while I try to explain it. GNOG will first be acquired by Landcadia Holdings II, which itself is already publicly traded under the ticker LCA. Once the transaction is completed, Landcadia II will change its name to Golden Nugget Online Gaming, Inc. and change its ticker symbol to GNOG. This kind of transaction is called a reverse merger.

Financial puzzle pieces

Landcadia II is a “special purpose acquisition company” created by Jefferies Financial Group Inc. and Fertitta Entertainment, Inc., the holding company that holds the companies owned by Tillman Fertitta. Those companies include the Houston Rockets, Landry’s, and Golden Nugget casinos.

A special purpose acquisition company (SPAC), also called a “blank check company,” is a company formed for the sole purpose of raising money to acquire an existing company. It does no business. It is just a company into which people invest and hope to get a nice return when the SPAC buys another company.

And that’s what happened here. Fertitta and Jefferies created Landcadia Holdings II, which is now fulfilling its destiny and buying Fertitta’s GNOG. It is a way for GNOG to become publicly traded company without going through the lengthy IPO process. Landcadia is already publicly traded and it’s just going to trade its name and its ticker symbol to POOF make GNOG publicly traded.

Fertitta will still the boss

“GNOG is one of the best positioned companies to capitalize on this massive online gaming opportunity in the US,” said Rich Handler, Co-Chairman of Landcadia II and CEO of Jefferies LLC in Monday’s announcement.

In what should come as no surprise, Tilman Fertitta will stay on as chairman and CEO of GNOG. Thomas Winter will continue as GNOG’s president.

As for the financials, Landcadia II will pay approximately $745 million in a combination of cash and equity for GNOG, 6.1x GNOG’s estimated 2021 revenue. Fertitta will effectively control the company via his economic interest and voting interest.

New Jersey is currently the only state in which Golden Nugget Online Gaming operates, but it does have partnerships in place in Michigan and Pennsylvania and plans to launch in those states next year. It is the largest online casino in New Jersey, making more than $11 million net income last year.

DraftKings went public in a similar manner in April. It was acquired along with sportsbook technology developer SBTech by Diamond Eagle Acquisition Corp., a special-purpose acquisition company. Once the $2.7 billion transaction was completed, DraftKings began trading under the DKNG ticker symbol on Nasdaq.

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