Ain’t nothin’ goin’ on but the rent
Gaming REIT ‘could not withhold consent’ on Boyd bid for Penn
Despite CEO skepticism, GLP is not in a position to block any bid for Penn.
In +More: Bally’s launches Bally Bet Sportsbook, RushBet lands in Peru.
Analysts react to BetMGM’s underwhelming trading update.
Analysts have their say on a “tolerable deal” for Bally’s creditors.
Sector watch looks at Saudi Arabia’s interest in esports.
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Carlino’s way
You think you’re big time? Onlookers could be forgiven for thinking they detected a distinctly frosty tone to the comments from Peter Carlino, CEO at Gaming & Leisure Properties, during his company’s Q2 earnings call on Friday last week regarding the potential for Boyd Gaming to bid for Penn Entertainment.
I love you, you pay my rent: Carlino, of course, has strong links with Penn having been the CEO of the company his father founded Penn National Gaming, as it was then known, before moving to head up the GLP REIT spin-off in 2013.
“I would look with a jaundiced eye towards anything that could upset the apple cart of what we have here,” he told analysts last Friday when asked about the potential for a Boyd approach.
“We like our cross-collateralized leases, and would be very reluctant to see anything change.”
Power play: But the key for Boyd Gaming, or any other potential Penn Entertainment suitor, is whether this reluctance to see a sweet arrangement disturbed could translate into outright opposition. As the analysts at Truist suggested, in some sense GLP “has the power” and holds “conditional blocking powers” in the event of any M&A.
“Specifically, in its master lease with Penn, GLP has change of control provisions which set various conditions for an acquirer and could require GLPI’s approval for any divestitures/ lease modifications,” they add.
But, crucially, GLP would not be able to withhold consent if the acquirer “meets certain predetermined thresholds” or if there are no structure changes made to the leases.
Someone like you: Sources suggest that “someone like Boyd” would indeed be pre-qualified by virtue of its size and its obvious experience in gaming operations along with a decent leverage profile. “So GLP could not withhold consent unless it needed to modify the leases,” one investment source added.
I heard that you settled down: This is unlikely to be the case, they suggest. If the Federal Trade Commission were to recommend the combined entity sell some assets due to competition issues, Boyd would likely be able to offload one of its own wholly-owned assets rather than any opco/propco assets owned by Penn/GLP.
Something in return: Moreover, in any transaction, GLP would “want to maximize value” for their own shareholders so if Boyd wanted to modify a lease, it would be motivated to give GLP something in return. This could also be giving it the ability to buy an asset or real estate, or call options on future deals.
“For GLP, any deal that results in a higher credit quality tenant should be great for them. Boyd has lower leverage and more owned real estate than the other GLP tenants and would be better credit quality,” suggested the investment source.
GLP could then have “many reasons to like a potential deal if it were to happen,” regardless of Carlino’s reluctance to see the Penn name disappear.
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Bally’s has launched Bally Bet Sportsbook in Maryland after receiving a license from the state regulator.
Rush Street Interactive’s RushBet has launched in Peru under the country’s new licensing regime.
Third Planet Affiliates, formerly an E+M startup focus, has bought the Props.com domain from FansUnite for an undisclosed sum. Third Planet is the publisher behind LotteryGeeks.com and CasinoReports.com.
Mixed messages on BetMGM
In the long run we are all dead: Looking into BetMGM’s H1 update yesterday, the team at Jefferies suggested they “remain confident” over BetMGM’s ability to improve execution in the near term. “But medium to long-term change is also likely.”
The analysts noted the release made no mention of the appointment of Gavin Isaacs as CEO last week.
This omission “leaves open the question” on whether the joint custody parents remain partners, merge or “pursue one of myriad other permutations which leaves MGM in control of the entity.”
Welcome to the show: MGM Resorts was unscathed by what amounted to a profit warning after BetMGM said losses would likely be near $250m this year. Its shares rose 2% on the day.
But Entain was less fortunate, its share price tumbling over 8%. In the week since Isaacs’ appointment, it is now down 10%.
💥About that honeymoon period… Entain down 10% in a week
Muddy waters: Notable was BetMGM’s change of wording for the projected $500m of adj. EBITDA which now is slated for “the coming years,” rather than the previous target of FY26. “Today’s update is disappointing and suggests double digit earnings cuts to FY24-26E consensus forecasts,” said the analysts from Investec.
The team at JMP characterized the update as providing a “more muddy view” of BetMGM’s prospects with total losses now predicted at $1.5bn.
Mountain to climb: The JMP team added a push to $500m “would need to come through massive market share gains at a time when promotional intensity and sales and marketing across online gaming are getting more competitive.”
Investec similarly posited that the going isn’t getting any easier, though it noted the efforts being taken to utilize Angstrom with BetMGM’s SGP product.
Marketing intensity in US OSB and gaming “will not reduce,” making it challenging for BetMGM to hit the long-term EBITDA margin target of over 30%.
Bally’s ‘tolerable’ deal
I guess that’ll have to do: The $18.25-a-share offer for Bally’s from major shareholder Standard General announced late last week was “more tolerable for creditors” than had been feared, suggested the credit analysts at CBRE.
Bally has secured $500m of first lien debt to secure the deal while CBRE said they understood that Bally’s will also commit up to $160m to facilitate the equity buyout of investors not willing to rollover their investment while ~$250m will go towards debt repayment at Queen Casino & Entertainment.
Overall, the CBRE team added, the transaction is “more manageable” for credit investors than when the original $15-a-share offer was made.
“The addition of debt-free Queen Casino assets is a positive while only a portion of the $500m will be used to pay investors if there is a sizable rollover participation.
The analysts also suggested that Queen Casino’s equity stake in Intralot – mentioned in the merger agreement – could be monetized post-deal for ~$250m.
The landlord’s view
Active participant: As per today’s top story, GLP had a lot to say on its earnings call last week including comments on the acquisition of Bally’s. The team at Truist said the company has proved its deal-making chops of late and is set to play an “active role” in the Bally’s Chicago project, with GLP providing industry expertise as the construction is set to begin.
👀 “Additionally, in a worst case scenario where Bally’s has to exit Chicago, we believe there would be significant demand from other well-established operators to take over at comparable terms,” the team added.
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Sector watch – Esports
The Saudi Kingdom brings peace? The two leading data suppliers in the esports space, GRID and Bayes Esports have put their differences behind them and joined forces to provide official data solutions for the Esports World Cup in Riyadh.
Bayes has exclusive data rights for ESL FACEIT Group events, which is owned by Savvy Gaming Group (PIF) whereas GRID has rights for certain titles being played out in Saudi.
Esportswashing, what esportswashing? As the Esports World Cup $60m+ tournament series gets underway, Team Liquid have been permitted to wear Pride jerseys on stage. This has been met with a somewhat frosty response from the community.
Despite Saudi’s strict laws relating to gambling, there has been no requirement for teams with existing gambling sponsors to cover up company branding. However, there has been no official betting sponsor of the tournament.
The League of Legends tournament reached over 1 million peak views in a strong start for the inaugural edition’s viewership.
Vocal critics have not deterred brands, with a string of partnerships including Heinz, Mentos, Amazon, Secretlab, Logitech and Jameel Motorsport joining a growing list of premium sponsors.
PrizePicks goes big on esports: The US Daily Fantasy operator has unveiled ‘The Esports Lab’, a polished educational hub for esports daily fantasy players. A company release stated “Esports currently ranks fourth in fan engagement among all sports on PrizePicks, trailing only professional basketball, football and baseball”
Given the inherent digital nature of esports, ‘fan engagement’ is probably the key phrase here. A look at entries would likely tell a different story.
PrizePicks has also signed a partnership for official data with Bayes Esports, underlining its commitment to a solid esports offering in the US.
Tier ones continue to abstain: In partnership news, the main activity in the market has been from companies such as 1xBet, Russian operator Pari, GG.Bet and crypto-first book Thunderpick. The allure of a plethora of landmark UK tournaments has not been enough to persuade anyone to dip back in just yet.
Calendar
Jul 30: IGT, Accel, Caesars, Lottomatica, PointsBet
Jul 31: MGM Resorts, Rush Street, Codere Online, Bally’s
Aug 1: DraftKings (earnings), VICI
Aug 2: DraftKings (call)
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