DraftKings agrees $750m deal to snap up lottery courier Jackpocket
Boston-based operator set to expand into growing lottery space with cash-plus-stock deal for one of the sector’s fastest-growing brands
DraftKings has reached an agreement to acquire lottery courier app Jackpocket in a cash-plus-stock deal worth around $750m.
The acquisition, which is expected to be completed in H2 2024, will see the Boston-based operator expand into the burgeoning US lottery space.
DraftKings said the deal would allow for “access and growth into the massive US lottery industry, but more importantly strengthen its position in sportsbook and igaming through higher customer lifetime value”.
The operator also pointed to synergies for enhanced customer acquisition and greater cross-sell opportunities.
Management said Jackpocket’s customer acquisition cost (CAC) was around 80% lower than what it costs DraftKings to acquire players, which would “drive more efficient marketing”.
Elsewhere, DraftKings championed “significant customer overlap” between the two firms, with overlapping customers having 50% higher lifetime value profiles.
Jackpocket, which launched an online casino offering in New Jersey this year, offers lottery courier services in 16 states, plus Puerto Rico and Washington DC.
The company was founded in 2013 and, according to market intelligence firm Sensor Tower, was downloaded nine times more than its closest competitor in the digital lottery app category during 2023. Last year, EGR explored the rise of lottery courier services, including Jackpocket.
DraftKings and Jackpocket penned a merger agreement on February 11, which will see Jackpocket shareholders receive around $412.5m in cash and approximately $337.5m in DraftKings common stock.
The stock portion of the deal is subject to a collar pursuant based on the average price of DraftKings stock as of the second trading day preceding the closing of the transaction.
Jackpocket shareholders will receive the $337.5m in Class A common stock should DraftKings share price remain between $31.68 and $42.86 over a 30-trading-day volume weight average.
DraftKings said that should the average stock land outside this range, Jackpocket shareholders will receive a fixed number of shares.
If the share price is between $31.68, shareholders will receive approximately 7.9 million shares, and if it is above $42.86, around 10.7 million.
The merger agreement and proposed transaction have been approved by both boards, as well as Jackpocket’s shareholders.
In terms of the financial impact of the acquisition, DraftKings management said that assuming there are no further online sports betting or igaming state launches, the deal should drive $260m to $340m of incremental revenue in 2026.
That revenue boost is set to be augmented with a $60m to $100m jump in incremental adjusted EBITDA.
DraftKings noted that on the same basis, by 2028, the transaction will drive $350m to $450m of incremental revenue and $100m to $150m of incremental adjusted EBITDA.
Additionally, DraftKings highlighted how Jackpocket revenue is expected to increase 70% year on year in 2024, which would be 15x faster than the broader US lottery sector.
The lottery vertical, which generates more than £100bn in annual ticket sales, is projected to grow at a 5% CAGR through to 2028, according to H2 Gambling Capital.
Jason Robins, DraftKings co-founder and CEO, said: “We are very excited to enter the rapidly growing US digital lottery vertical with our acquisition of Jackpocket.
“This transaction will create significant value for DraftKings not only by giving our customers another differentiated product to enjoy but also by improving our overall marketing efficiency similar to how our daily fantasy sports database created an advantage for DraftKings in OSB and igaming.”
Meanwhile, Peter Sullivan, Jackpocket CEO, said: “Together with DraftKings, we will be able to bring tremendous value to our customer base as we advance our mission to create a more convenient, fun, and responsible way to take part in the lottery.
“DraftKings’ broad footprint and exceptional mobile products present an opportunity to meaningfully expand the digital lottery vertical, and we could not be more excited to come together with DraftKings,” he added.
DraftKings stock was down around 3% in after-hours trading to $44.46.