Bally's (BALY) and Gamesys Statement regarding possible combination

March 24, 2021 8:28 AM EDT

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The board of Bally's (NYSE: BALY) and the board of Gamesys are pleased to announce that they have reached agreement in principle on the key terms of a possible combination of Bally's and Gamesys pursuant to which Bally's would acquire the entire issued and to be issued ordinary share capital of Gamesys. The Possible Combination is anticipated to be implemented by means of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006.

The Gamesys Board and Bally's Board believe that the Possible Combination has a compelling strategic and financial rationale, would create long-term value for both Gamesys and Bally's and would be consistent with Bally's and Gamesys' respective long-term growth strategies.

Gamesys would benefit from Bally's fast-growing land-based and online platform in the United States, providing market access through Bally's operations in key states as the nascent iGaming and sports betting opportunity develops in the US. Bally's would benefit from Gamesys' proven technology platform, expertise and highly respected and experienced management team across the online gaming field. The combined group would be well positioned to capitalise on the full range of opportunities present both in the US and beyond.

Under the terms of the Possible Combination, Gamesys shareholders would be entitled to receive:

for each Gamesys Share: 1,850 pence in cash (the "Cash Offer")

The Cash Offer represents a premium of:

(i) approximately 12.7 per cent. to the closing price per Gamesys ordinary share (each, a "Gamesys Share") of 1,642 pence on 23 March 2021 (being the last practicable date prior to this announcement (the "Latest Practicable Date"));

(ii) approximately 39.1 per cent. to the closing price per Gamesys Share of 1,330 pence on 25 January 2021, being the last trading day prior to Bally's initial proposal to Gamesys dated 26 January 2021; and

(iii) approximately 34.7 per cent. to the average closing price per Gamesys Share of 1,373 pence for the three-month period prior to the Latest Practicable Date on a volume weighted average price basis.

As part of the Possible Combination, Bally's has also proposed to make a share alternative available to Gamesys shareholders (the "Share Alternative"). Under the terms of the Share Alternative, Gamesys shareholders (other than Gamesys shareholders resident or located in jurisdictions in which it might be unlawful to make the Share Alternative available or where to do so would result in compliance requirements or formalities which Gamesys or Bally's regard as unduly onerous) would be entitled to elect to receive newly issued common stock of Bally's ("New Bally's Shares") in lieu of part or all of the cash consideration to which they would otherwise be entitled under the Possible Combination, using the following exchange ratio:

for each Gamesys Share: 0.343 New Bally's Shares

Based on Bally's closing published sales price of US$66.34 as reported by the New York Stock Exchange and the exchange rate of US$1.375:£1 as at 4 p.m. Eastern Time on the Latest Practicable Date, the terms of the Share Alternative value each Gamesys Share at 1,655 pence each.

The Share Alternative would enable Gamesys shareholders to participate in the value creation opportunity resulting from the Possible Combination, in respect of all or part of their Gamesys shareholding.

The Gamesys Board has indicated to Bally's that it is minded to recommend the Cash Offer to Gamesys shareholders, subject to reaching agreement on the other terms and conditions of the Possible Combination and the satisfactory completion of reciprocal due diligence.

There can be no certainty that an announcement of a firm intention to make an offer under Rule 2.7 of the Code (a "Rule 2.7 Announcement") will be made in respect of the Possible Combination, but if one is made, any transaction would be subject to, among other things, approval of Gamesys shareholders and customary regulatory approvals. Bally's shareholders would also be required to approve the issuance of the New Bally's Shares pursuant to the Share Alternative.

The combined group would be headquartered in Rhode Island, USA, and its shares would retain their listing on the New York Stock Exchange.

Commenting on the Proposed Combination, Soo Kim, Chairman of Bally's, said:

"We believe that this combination would mark a transformational step in our journey to become a leading integrated, omni-channel gaming company with a B2B2C business. We think that Gamesys' proven technology platform alongside its highly respected and experienced management team, combined with the US market access that Bally's provides, should allow the combined group to capitalise on the significant growth opportunities in the US sports betting and online markets.

We are truly excited about the opportunities that this combination would offer and the enhanced and comprehensive experience and product offering that it would enable us to offer our customers."

Commenting on the proposed Combination, Lee Fenton, CEO of Gamesys, said:

"From our first meeting to now it has been the entrepreneurial energy of the two businesses that has brought us to the edge of creating a uniquely powerful company. Our shared passion and vision to capitalise on technology disruption to better serve our customers, wherever they may be, should make for an exciting journey for our employees, customers and shareholders alike."

Shareholder Support

Each of the former founding investors of Gamesys, being Noel Hayden, Andrew Dixon and Robin Tombs (the "Former Gamesys Founders"), along with Lee Fenton and Robeson Reeves, both of whom it is intended would hold an executive role in the combined group (the "Gamesys Executives") and HG Vora Special Opportunities Master Fund, Ltd. ("HG Vora"), in respect of their entire beneficial shareholdings and those of certain of their close relatives and related trusts (representing, in aggregate, 30.5 per cent. of Gamesys' issued ordinary share capital as at close of business on the Latest Practicable Date) have indicated their intention to support the Possible Combination if a recommended Rule 2.7 Announcement is published on the terms set out in this announcement.

In addition, the Former Gamesys Founders and the Gamesys Executives have indicated their intention to commit to elect for the Share Alternative in respect of their entire beneficial shareholdings and those of certain of their close relatives and related trusts (representing, in aggregate, 24.3 per cent. of Gamesys' issued ordinary share capital as at close of business on the Latest Practicable Date).

Board and Management

It is intended that Gamesys' CEO, Lee Fenton, would become the CEO of the combined group and that two additional Gamesys directors would join Bally's board. It is further intended that Bally's CEO, George Papanier, would remain a member of the board and a senior executive running the retail casino business.

Gamesys Dividends

The Gamesys Board has proposed a final dividend in respect of the year ended 31 December 2020 of £30.6 million in aggregate, which, based on Gamesys' issued share capital as at the Latest Practicable Date, would equate to 28 pence per Gamesys Share (the "Gamesys Final Dividend") for approval by Gamesys shareholders at Gamesys' 2021 annual general meeting (currently expected to be held in June 2021).

In addition, if the Possible Combination has not completed before the ex-dividend date of 9 September 2021, the Gamesys Board reserves the right to declare an interim dividend for the six months ended 30 June 2021 of an aggregate amount of up to £16.4 million which, based on Gamesys' issued share capital as at the Latest Practicable Date, would equate to a dividend of up to 15 pence per Gamesys Share (the "Second Gamesys Interim Dividend").

Reservations

Bally's reserves the right to:

· implement the Possible Combination through or together with a subsidiary of Bally's;

· announce an offer (including a cash offer and/or a share offer) for Gamesys on less favourable terms than those described above:

o with the agreement or recommendation of the Gamesys Board; or

o following the announcement by Gamesys of a whitewash transaction pursuant to the Code; and/or

· if any dividend or other distribution or other return of capital or value is authorised, declared, made or paid or becomes payable in respect of Gamesys Shares on or after the date of this announcement (other than, or in excess of, the Gamesys Final Dividend and the Second Gamesys Interim Dividend), reduce the cash and/or share component of the Possible Combination by the aggregate amount of such dividend or other distribution or other return of capital or value.

Rationale for the Possible Combination

Bally's and Gamesys believe that the online gambling and sports betting sector in the US continues to exhibit many characteristics that are structurally attractive with a steep anticipated growth trajectory as favourable regulatory progress throughout the US leads to the opening of new sports betting and iGaming markets. This opportunity is reflected in industry analysts estimating a potential total addressable market size in excess of US$45 billion. Bally's and Gamesys believe that having a combination of both proven, developed technology and land-based platforms across key US states, with global brands, existing customer bases and complementary product offerings will be key to taking advantage of these growth opportunities. The following factors have also been taken into consideration by Bally's and Gamesys in connection with the Possible Combination:

· the two companies believe that the Possible Combination represents a compelling strategic and financial opportunity to improve the offering and experience for customers;

· the Possible Combination would accelerate Bally's long-term growth strategy, the objective of which is to become the premier, truly integrated, omni-channel US gaming company with a B2B2C business;

· Gamesys' existing platform would benefit from Bally's fast-growing land-based and online platform in the US, providing market access through Bally's operations in key states as the nascent iGaming and sports betting opportunity develops at this pivotal moment in the market's evolution;

· Bally's would benefit from Gamesys' proven technology platform, expertise and highly respected and experienced management team. These offerings, integrated with Bally's online sports betting platform via the pending Bet.Works acquisition and the transformational media partnership with Sinclair Broadcast Group, would place the combined group in a strong position to capitalise on the quickly developing US online market;

· the Possible Combination would create significant value for Bally's by bringing in-house a technology platform to further build out iGaming offerings and create a unified player development database; and

· the combined group is expected to be highly cash flow generative, enabling it to pursue growth opportunities through reinvestment and strategic M&A. The greater number of registered accounts and monthly active customers that would result from the Possible Combination, together with a more diversified player community and an enhanced customer database, is expected to create opportunities to increase growth and profitability.

Funding

Should a Rule 2.7 Announcement be made in respect of the Possible Combination, it would be Bally's intention to fund the Cash Offer through a certain funds bridge facility, a portion of which will be refinanced through the proceeds of an equity capital raise. The maximum cash consideration payable to Gamesys shareholders, if only the Former Gamesys Founders and Gamesys Executives elect for the Share Alternative, would amount to approximately £1.6 billion.

Further details regarding the funding of the transaction will be provided as appropriate in due course.

Pro forma for the transaction, Bally's expects to maintain its historically conservative capitalisation policies, providing it with the stability and financial flexibility to continue to pursue a disciplined omni-channel gaming and entertainment growth strategy.

Information on Bally's

Bally's is listed on the New York Stock Exchange (NYSE) and its shares trade under the ticker symbol "BALY".

Bally's is a leading owner and operator of land-based casinos in the US. Bally's currently owns and manages 12 properties; 11 casinos across seven states, a horse racetrack and 13 authorized off-track betting licenses in Colorado. With over 6,000 employees, Bally's operations include 12,890 slot machines, 443 game tables and 2,904 hotel rooms. Following the completion of pending acquisitions, as well as the construction of a land-based casino in Centre County, Pennsylvania, Bally's will own and manage 15 casinos across 11 US states.

In November 2020, Bally's announced that it had entered into a definitive agreement to acquire Bet.Works, a US based, sports betting platform provider to operators in New Jersey, Iowa, Indiana and Colorado. Upon acquiring Bet.Works' proprietary technology stack and turnkey solutions, which include marketing, operations, customer service, risk management and compliance, Bally's believes it will position it to become a leading, full-service, vertically integrated sports betting and iGaming company in the US with physical casinos and online gaming solutions united under a single, leading brand, thus enabling it to launch its B2B2C business model.

In November 2020, Bally's announced a long-term strategic partnership with Sinclair Broadcast Group that combines its vertically-integrated, proprietary sports betting technology and expansive market access footprint with Sinclair's portfolio of local broadcast television stations and live regional sports networks, the STIRR streaming service, the Tennis Channel and digital and over-the-air television network Stadium.

Bally's recent acquisitions of Monkey Knife Fight and SportCaller provide Bally's with digital/interactive footprints, provide access to the potentially lucrative interactive mobile sports betting and iGaming markets and diversify it from a financial standpoint.

Bally's aims to continue to grow the business by actively pursuing the acquisition and development of new gaming opportunities and reinvesting in existing operations. Bally's believes that interactive gaming, including mobile sports betting and iGaming represents a significant strategic opportunity for its future growth. In addition, it seeks to increase revenues at its brick and mortar casinos through enhancing the guest experience by providing popular games, restaurants, hotel accommodations, entertainment and other amenities in attractive surroundings with high-quality guest service.

Information on Gamesys

Gamesys is listed on the premium listing segment of the Main Market of the London Stock Exchange under the ticker symbol "GYS" and is the parent company of an online gaming group that provides entertainment to a global consumer base. Through its subsidiaries, Gamesys currently offers bingo and casino games to its players using brands which include Jackpotjoy, Virgin Games, Botemania, Vera&John, Heart Bingo, Megaways, Rainbow Riches Casino and Monopoly Casino, and focuses on building its diverse portfolio of distinctive and recognisable brands that deliver best-in-class player experience and gaming content.

As a leading international online gaming operator, Gamesys' market position and diverse customer base (both geographically and demographically) position Gamesys strongly against its competitors in addition to providing Gamesys with significant opportunities to deliver further growth. Gamesys' core brands have historically demonstrated significant rates of customer retention, achieved through a combination of Gamesys' diverse and engaging range of tailored content, strong customer relationship management and player engagement capabilities and its multi-brand strategy, which enables Gamesys to offer players a bespoke proposition catering for different player demographics and styles of play, as well as providing Gamesys with cross-marketing opportunities to improve the ultimate value derived from players.

Gamesys is well-capitalised and has demonstrated a strong track record of cash generation, with operating cash flow of £214.4 million for the year ended 31 December 2020. During the same period, Gamesys achieved annual revenues of £727.7 million (representing growth on a pro forma basis of 29% compared to 2019) and an adjusted EBITDA of £206.2 million (representing growth on a pro forma basis of 30% compared to 2019).



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