Golden Entertainment, the largest tavern owner and largest slot route operator in Nevada, announced that it is divesting what has been a pillar of its business, its distributed gaming operations in Nevada and Montana.
Golden, which owns the STRAT and Arizona Charlie’s casinos in Las Vegas and the Aquarius in Laughlin as part of an operation that includes 16,800 slots, over 100 table games and over 6,200 hotel rooms, has entered into definitive agreements to divest its slot-route operations to Illinois-based J&J Ventures Gaming, LLC (J&J Gaming) for aggregate cash consideration of $322.5 million, plus $39 million of estimated purchased cash at closing.
J&J Gaming will acquire Golden’s Nevada routes for $213.5 million plus an estimated $34 million of purchased cash and Golden’s Montana routes for $109 million plus an estimated $5 million of purchased cash, subject to customary working capital adjustments.
In addition, Golden will enter into a five-year agreement with J&J Gaming under which J&J will support the gaming operations of Golden’s branded tavern locations in Nevada, headed by the PT’s chain of taverns, at financial terms consistent with the company’s past practice.
The aggregate cash consideration plus purchased cash represents a multiple of approximately 9 times the adjusted EBITDA for Golden’s distributed gaming segment for the year ended December 31, 2022 of $44 million, net of $3.8 million of corporate costs allocated to the company’s distributed gaming segment.
“Our leading distributed gaming operations in Nevada and Montana were built over the last 20 years through the hard work and dedication of our team members, who provide exceptional service and support to our valued route partners,” said Blake Sartini, chairman and chief executive officer of Golden.
“We believe this transaction will provide further success for our route partners through sharing of best practices and new technology. We anticipate our distributed gaming team members will continue to serve our route partners with the same dedication under J&J Gaming’s ownership. Our confidence in J&J Gaming’s future success is highlighted by our new long-term agreement with J&J Gaming to service Golden’s wholly owned tavern portfolio.
“For Golden, these transactions will allow us to focus our management team and capital on our portfolio of wholly owned casinos and taverns in Nevada and create additional value for our shareholders.”
The day of the announcement, JP Morgan released an investor’s note calling the deal positive to investors.
“The sale further simplifies Golden’s business (recall it recently announced a sale of Rocky Gap Casino for 10 times) and should remove a drag on Golden valuation, as investors have largely ascribed a mid-single-digit multiple to the distributed-gaming business,” said the note from analyst Omer Sander.
Sander added that the note will allow further expansion of Golden’s casino portfolio, “predominantly casinos in Nevada or, on the other side, potentially positions Golden as an acquisition candidate. In short, the deal is good for the average institutional investor, given the sale premium valuation to where Golden trades and also for other operators looking to grow inorganically in the Nevada casino/tavern market. Post-deal, 100% of Golden’s EBITDA will come from Nevada.”
Shares of Golden were up 6.8 percent on the Nasdaq exchange the day of the announcement.
Established almost 100 years ago, J&J Gaming is a privately held business and the leading distributed gaming operator in Illinois, with related operations in several other states.
Golden Entertainment was formed in 2015 through the merger of Sartini’s Golden Gaming route operation with Minnesota-based casino operator Lakes Entertainment. In addition to the routes, Golden owns 10 casinos—nine in Southern Nevada and the Rocky Gap Casino in Maryland, pegged for sale to Century Gaming and VICI properties—and more than 60 traditional taverns in Nevada. Through its distributed gaming operations in Nevada and Montana, Golden operates video gaming devices at over 1,000 locations.
The transactions are expected to close prior to the end of the year, subject to customary regulatory approvals and closing conditions. Latham & Watkins LLP is acting as legal counsel to Golden in connection with the transactions.