UPDATE 11/1/22: Boyd Gaming on Tuesday announced it completed the previously announced $170 million acquisition of Pala Interactive and its subsidiaries ahead of schedule, as expected from its third-quarter earnings call. The acquisition was originally expected to be completed in the first quarter of 2023.
“Online casino gaming is an attractive growth opportunity for our Company, and the acquisition of Pala Interactive provides us with the technology, products and expertise to create a profitable regional online casino business,” said Keith Smith, President and Chief Executive Officer of Boyd Gaming. “We look forward to working with the Pala Interactive team in executing our online casino gaming strategy, which will complement our existing land-based operations and further expand our nationwide customer base.”
ORIGINAL ARTICLE 3/28/22: Boyd Gaming announced late Monday that its wholly owned subsidiary, Boyd Interactive Gaming Inc., is acquiring online-gaming technology company Pala Interactive for $170 million in cash. One Wall Street analyst said that this will be one of many additional acquisitions in the digital space.
Boyd Gaming said the acquisition, expected to close by the first quarter of 2023, doesn’t affect its sports-betting partnership with FanDuel, in which it has a 5% stake. In April 2021, FanDuel launched its online casinos in Pennsylvania and New Jersey, under Boyd’s brand, Stardust Casino.
“Boyd will migrate the Stardust business, which is currently operated by FanDuel, in-house and integrate it with the B Connected loyalty system,” said equities analyst David Katz with Jefferies Equities Research. “Given that management has indicated its plan to own its igaming brand previously, this shouldn’t come as a large surprise. Also, given the size of the transaction and marginal (adjusted earnings) contributions or capital requirement near-term, we expect a generally neutral reaction to the share.”
Boyd indicated its current digital operations, which include mobile sports-betting in six states, igaming in Pennsylvania and New Jersey, and social gaming, generated $24 million in adjusted earnings in fiscal year 2021 and should exceed $30 million in 2022, Katz said.
Pala Interactive is an online-gaming technology company that provides proprietary real-money and social-gaming solutions on both a business-to-business and business-to-consumer basis across the U.S. and Canada. Katz said Pala Interactive generated about $5 million in adjusted earnings, which is expected to grow in 2022.
The deal provides some broad-based insight for the publicly traded names that have been under significant pressure.
“Our view is that conditions and valuations in the market are ripe for more acquisitions of digital names,” Katz said. “In this regard, Boyd’s acquisition could look increasingly attractive over time.”
Pala Interactive’s technology, which includes its player account-management system, online casino and poker, and social-casino and poker platforms, provides business-to-business services in eight states across the United States and Canada and operates business-to-customer offerings in New Jersey and Canada.
“The acquisition of Pala Interactive marks the next phase in the ongoing execution of our igaming strategy, providing us full control over the technology, development, and customer experience,” said Keith Smith, president and CEO of Boyd Gaming. “By integrating online casinos with our existing land-based operations, we will be able to further leverage and monetize our expansive customer database and the amenities of our nationwide portfolio of properties, driving growth in both our land-based and igaming operations.”
Smith said that given Boyd’s nationwide geographic distribution, significant database, and established loyalty program, it makes sense to pursue a direct approach with its igaming operations.
“By engaging directly with our guests and having the ability to personalize the customer experience, we are confident in our ability to create a cost-effective and profitable regional igaming business,” Smith said. “While the acquisition of Pala Interactive supports our igaming strategy, we remain fully committed to our sports-betting partnership with FanDuel, which has allowed us to participate in the nationwide expansion of sports betting. We look forward to welcoming the Pala Interactive team to our company and building a highly successful online gaming business in the years ahead.”
Katz said the acquisition should be “generally neutral” for the shares, given it fulfills management’s indication of continued build-out of Boyd’s igaming business long-term and consumes a moderate amount of capital in the near term.
“We view the announcement as consistent with Boyd’s methodical approach to digital gaming, including its partnership with FanDuel for online sports betting and its gradual build in igaming,” Katz said.
