Golden Entertainment Sells Distributed Gaming Unit for $361.5 Million

Golden Entertainment (NASDAQ: GDEN) announced Monday it s selling its distributed gaming operations in Montana and Nevada for $322.5 million in cash plus estimated cash considerations of $39 million upon closing of the transaction.

Privately held J J Ventures Gaming is acquiring the businesses from Golden and will enter into a five-year agreement with the casino operator to “support the gaming operations of Golden’s branded tavern locations in Nevada.” Those include PT’s Pubs, which are ubiquitous throughout the Las Vegas Valley. It that Golden could mull a sale of the distributed gaming unit as an avenue to raise cash to reduce debt and support share repurchases.

J J Ventures Gaming will acquire Golden’s Distributed Gaming Operations in Nevada for $213.5 million plus an estimated $34 million of purchased cash and Golden’s Distributed Gaming Operations in Montana for $109 million plus an estimated $5 million of purchased cash, subject to customary working capital adjustments,” according to a statement.

Net of $3.8 million in corporate costs, the sale price represents a multiple of 9x of adjusted 2022 earnings before interest, taxes, depreciation, and amortization (EBITDA) for Golden’s distributed gaming arm. The transaction is scheduled to close by the end of this year.

B. Riley analyst David Bain, who initially floated the idea of Golden divesting the distributed gaming unit to unlock shareholder value, said the sale “simplifies” the story around the stock and allows the company to focus on its Nevada operations.

“We believe valuation should go higher. GDEN’s third-party distributed gaming business was typically the least understood and thought of business by investors, in our view,” wrote Bain in a note to clients on Monday. “We believe GDEN’s remaining operations combine for a strong, high-margin play on NV growth/catalysts. Essentially, we see GDEN as now a sharpened, simplified NV pure play.”

He reiterated a “buy” rating on the shares with a $70 price target, implying upside of 72.66% from the March 3 close.

With of the Rocky Gap Casino Resort in Flintstone, Md., announced last August and slated to close in the second quarter, Golden will be able to further its operations in its home state because Rocky Gap is the lone venue in its portfolio located outside of Nevada.

“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,” said CEO Blake Sartini in a statement detailing the deals with J J Ventures.

Riley’s Bain to pursue acquisition opportunities this year, opting to focus on its Nevada casino and pub units. But it could mull regional/non-Las Vegas Strip variety purchases in 2024.

“More likely, we see increased existing and new return of capital policies. We anticipate more aggressive share repurchases through this year and into next, particularly if shares remain near current levels with a stable economy and initiation of dividend policy and/or a special dividend,” noted the analyst.

He added that Golden is unlikely to consider an outright sale of itself at current levels. Between the operator’s real estate holdings not being adequately valued by public markets and the departure of the distributed gaming unit, the company is now “a much simpler, attractive target for acquirers, in our view.”