Golden Nugget/Landry's Public to Go Public Via SPAC FAST Acquisition (FST)

February 1, 2021 7:04 AM EST
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Price: $12.56 -1.57%

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Fertitta Entertainment, Inc., the parent company of Golden Nugget/Landry's, a leader in the gaming, restaurant, hospitality and entertainment industry, and FAST Acquisition Corp. (NYSE: FST), a special purpose acquisition company, co-headed by Doug Jacob and Sandy Beall, announced today that they have entered into a definitive merger agreement that will result in Fertitta Entertainment becoming a publicly listed company.

Tilman Fertitta, sole owner of Fertitta, will continue to lead the Golden Nugget/Landry's empire and serve as the Chairman, President and CEO of the Company. Mr. Fertitta will also be the Company's largest shareholder with an approximately 60% interest in the Company and stock valued upon the closing of the transaction in excess of $2 billion dollars. No other changes to management are anticipated as the existing Golden Nugget/Landry's management team will continue to lead the Company. In addition, the transaction will include voting control and ownership by the Company of approximately 31 million shares or nearly half of all outstanding shares in Golden Nugget Online Gaming, Inc. (Nasdaq: GNOG) ("GNOG").

According to Tilman Fertitta, "I look forward to returning my Company to the public marketplace. After taking the Company private in 2010, we accomplished a lot. However, in today's opportunistic world, I determined that in order to maximize the opportunities in the gaming, entertainment and hospitality sectors, it was preferable to take my Company public. We first began to explore going public in 2019, as we saw tremendous M & A deals hitting the market. However, the pandemic set these efforts back. FAST provided us with the perfect merger vehicle to allow us to take control of an already existing public company. FAST's capital along with the equity investment from institutional shareholders will strengthen our balance sheet and allow us to pursue our acquisition strategy."

Fertitta added, "After I compared the opportunities provided by a transaction with FAST, versus the traditional IPO route, it became abundantly clear that we could access the capital markets with more certainty and speed if we did a deal with FAST. Working with Doug and Sandy has been a pleasure, and I truly appreciate their time and contribution to this process. At the end of the day, the decision to do a deal with FAST was a no-brainer."

"The hospitality industry is experiencing the greatest disruption of our lifetimes and Tilman and his team have remained the premiere gaming and restaurant operators in the country," said Doug Jacob. "We believe this diverse portfolio made up of full-service dining and entertainment concepts combined with pent-up consumer demand, will find continued success as a public company."

Sandy Beall added: "We are excited and honored to participate with Tilman and help to sponsor his Company's return to being a public company."

Acclaimed restaurant operator Eugene Remm, Chief Brand Officer for FAST and a partner with Tilman in the renowned Catch Restaurant Group, will serve on the Company's Board.

Investment Highlights

  • Large, Diversified Hospitality Business
    • Five Golden Nugget branded land based casinos in diversified markets across the United States
    • Over 500 outlets concentrated in high volume Upscale and Specialty concepts
    • Controlling stake in Golden Nugget Online Gaming, an award winning online gaming platform rapidly expanding into new markets
  • Best in Class Operator
    • Achieved over 41% land-based casino Adjusted EBITDA margins in Q3 2020, a nearly 10% increase over Q3 2019 despite limited capacity due to COVID-19 restrictions
    • Industry leading unit level Sales and EBITDA per restaurant, at $5.7mm and $1mm respectively
    • Achieved profitability in New Jersey online gaming for the past five years, despite increasing competition
    • iGaming North America Operator of the year for 4 consecutive years
  • Proven Track Record of High ROI Growth through Acquisitions and Operational Improvements
    • Executed over 25 acquisitions, including 6 public companies, for over $3 billion in its history
    • Achieved approximately 15% ROI on all casino acquisitions, including over 400% on its acquisition of its Atlantic City property
    • Grew unit level EBITDA from $208mm in 2010 to $741mm in 2019 as a private company
  • Significant Post-COVID Growth Opportunity
    • Accelerated legalization and expansion of online and land-based gaming
    • Significant restaurant closings reduces competition and drives incremental customer visits
    • Additional potential acquisition opportunities given financial distress caused by pandemic related closures
  • Strong Balance Sheet and Free Cash Flow Profile
    • 100% of transaction proceeds after fees will be used for general corporate purposes and debt repayment
    • Enhanced EBITDA margin profile from operational improvements implemented through the pandemic
    • 50%+ expected free cash flow conversion from up-to-date properties requiring limited capital expenditures
    • Ability to more efficiently raise capital going forward as a result of enhanced access to public markets
  • Seasoned Management Team and Significant Ownership Alignment
    • Company lead by founder, Tilman Fertitta, since 1986
    • Core management team has worked at the Company for over 20 years
    • Existing ownership is not selling any shares as part of this transaction
  • Market and innovation leader
    • Loyalty program used to cross promote casinos and restaurants
    • First to bring Live Dealer and Live Casino Floor to the online US marketplace
  • Serving large, high growth and resilient markets
    • Large collection of waterfront properties
    • Iconic locations, including Disney, Universal, Las Vegas, Time Square, San Antonio Riverwalk
    • High concentration of locations across the south
  • Multiple growth drivers
    • Proven track-record of growth through acquisitions with margin improvement
    • Approximately 50% ownership in GNOG
    • International expansion via licensing of brands
    • Organic growth of existing restaurant brands

Transaction Overview

The transaction implies an enterprise valuation for Golden Nugget/Landry's of approximately $6.6 billion, or 9.25x projected 2022 pro forma Adjusted EBITDA of $648 million, including the value of the GNOG equity to be contributed to the Company, based on an assumed per share trading price of approximately $18 for GNOG shares, which will be subject to adjustment based on the 60 day average price of the stock before closing. Estimated cash proceeds from the transaction are expected to consist of FAST's $200 million of cash in trust, assuming no redemptions. In addition, institutional shareholders have committed to invest approximately $1.2 billion in the form of a PIPE at a price of $10.00 per share of common stock of FAST immediately prior to the closing of the transaction.

The Company expects to use the proceeds from the transaction to accelerate the Company's growth initiatives, general corporate purposes and reduce existing debt. In connection with the merger, the parties will undertake certain reorganizational transactions to exclude from the public company certain businesses and assets that Tilman will continue to wholly own on a private basis.

The FAST sponsors and members of its board of directors and management team have agreed to a lock-up period of up to one year following the closing, subject to certain permitted transfers and a potential early release as early as approximately 180 days after Closing if certain trading price targets are met. Upon the Closing, and assuming none of FAST's public stockholders elect to redeem their shares, Tilman Fertitta is expected to own close to 60% of the Company, the FAST sponsors are expected to own 1% of the Company, PIPE participants are expected to own 35% of the Company, and the remaining public stockholders are expected to own 4% of the Company.

The boards of directors of each of FAST and Fertitta have unanimously approved the transaction. The transaction will require the approval of the stockholders of FAST and is subject to other customary closing conditions, including the receipt of certain regulatory and gaming approvals. The transaction is expected to close in the second quarter of 2021.

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