FST/FERTITTA – WITH TILMAN IT’S NEVER BORING!
The preliminary proxy for the merger of Fertitta Entertainment (FEI) into (SPAC) FAST Acquisition Corp. (FST) was filed on August 2nd. It usually takes the SEC about 90 days to approve this type of document and we would bet on the “over” in this case. The document is 250 pages long plus exhibits and Tilman Fertitta doesn’t stop doing deals, even when SEC filings are under review.
We have written before about FST/FEI, when the original business combination was suggested and when Fertitta sweetened the deal more recently. These reports can be accessed by way of the SEARCH function on our Home Page. (Fertitta, FST, etc.), the most recent article provided with the link below.
This morning it was announced that DraftKing (DKNG) is going to buy/merge with Golden Nugget Online Gaming (GNOG) (46% of which is owned by FEI). DKNG has been one of the very successful SPACs offered over the last several years, and Fertitta sponsored GNOG has done well also. DKNG is much bigger in terms of its equity capitalization, $21.1B vs. $1.4B for GNOG and sales as well, generating $297M of revenues in its most recent quarter, almost 13x the $23.1M of GNOG. DKNG has not been profitable yet, and is estimated to remain unprofitable through 2022. GNOG has been profitable the last two quarters but is currently expected to be unprofitable through 2022.
Both parties are predictably excited about the combination. There are expected to be $300M of synergies from the combination, and “the space” is exciting to investors. We will likely be writing more about this situation because the FST/FEI combination, when and if completed, will create a hospitality company with revenues approaching $10B and $800B of annual EBITDA.
Our interest at the moment is how this DKNG/GNOG transaction affects the still pending business combination of FST and FEI. While FEI has agreed not to sell their $700B worth of DKNG for at least a year, today’s premium added to GNOG shares and the enhanced liquidity for the future is clearly a positive. Recall that the recently sweetened deal, as described below, increased the EBITDA current annualized run rate to $800M, up from the previously expected $648M out in 2022. This additive adjustment was no doubt provided by Fertitta to create more investor comfort with the $3B of debt.
In brief, the prospect of liquidity in DKNG shares, to be worth $700M more or less, should make FST investors even more comfortable and increase the probability of the business combination being approved. We’ve provided a link to “the room where it happened” just below.
Roger Lipton