New legal clouds gathered above the acquisition of Golden Nugget Online Gaming (GNOG) by DraftKings after two new lawsuits were filed against Tilman Fertitta and his participation in the deal.
The new suits claim some of the financial and commercial terms of the $1.56 billion transaction benefitted unfairly Fertitta and several board members who have an influence on the proceedings and agreed to an inadequate implied per-share value of the company in comparison to its future share value.
The first complaint filed by GNOG minority shareholders Steven Eschbach and Anthony Franchi in the Delaware Court of Chancery under the state’s General Corporation Law was later joined by Carl Grove, who initially filed a lawsuit of his own.
Suspecting “wrongdoing in connection with the transaction” that was agreed at a price described publicly as a “steal” by DraftKings CEO, plaintiffs Eschbach and Franchi requested access to documents, including financial statements, company minutes, projections, fairness opinions, as well as those regarding the independence of directors and advisers.
Questionable Choice of Legal Advisers
Grove’s complaint also paid attention to the impartiality of Jefferies LLC, the firm that serves as legal advisers on the deal, and raised serious concerns due to existing extensive personal and business ties for at least four of the six board members with Fertitta.
“And the board was advised by Jefferies LLC, a joint venturer in other Fertitta-controlled entities and prior lender to Fertitta,” stated Grove’s complaint, questioning the choice of legal advisers for the deal, a concern also raised by the complained filed by Eschman and Franchi.
“The board formed a conflicted special committee at the 11th hour that failed to hire independent legal counsel and chose a financial advisor that was concurrently representing Fertitta in other matters and had been doing so for several years,” they stated in the lawsuit, outlining the board’s failure to impose “basic procedural safeguards” to protect shareholder interests.
Unique Benefits not Shared with Other Shareholders
Grove’s complaint also raised issues related to the exclusive commercial agreement signed between DraftKings and GNOG parent company, Fertitta Entertainment, to name the Boston-based firm the exclusive daily fantasy sport, sports betting and iGaming partner, besides the preferred pricing at Golden Nugget-owned properties.
Grove questioned the presence of a potential conflict of interest due to the unique benefits provided as part of the transaction that would not be available to other shareholders.
The acquisition deal was initially questioned in August, when legal firms Brodsky & Smith and Rigrodsky Law launched an investigation into the handling of the transaction, with regards to GNOG’s Board of Directors for “possible breaches of fiduciary duty and other violations” of state and federal law.