Golden Entertainment is set to double its annual revenues and triple its annual EBITDA with a deal, announced Monday, to acquire American Casino & Entertainment Properties for $850 million.
The deal will transfer four casino properties to Golden’s ownership. The most notable of these is the iconic Stratosphere Casino Hotel & Tower, a 1,149-foot structure located just off the Strip.
Also included in the transaction are the Aquarius Casino Resort in Laughlin – located near the southern tip of Nevada on the Colorado River, and Arizona Charlie’s Decatur and Arizona Charlie’s Boulder – both located in the Las Vegas valley.
The new entity combined will feature eight casinos – seven in Nevada and one in Maryland – nearly 16,000 gaming devices, 114 table games and 5,162 hotel rooms. It will sustain roughly 7,200 jobs and generate estimated net revenues of $850 million and adjusted EBITDA of $180 million for 2017.
The acquisition significantly expands Golden’s position in southern Nevada, where it currently owns three casinos, a rapidly expanding line of wholly-owned taverns and the largest slot route operation in the state.
“In my opinion, these assets are based in the strongest, most stable regional gaming market in the country – southern Nevada,” said Blake Sartini, chief executive officer, on a call with investors. “Nevada has the most stable tax and regulatory environment anywhere. Nevada, and Las Vegas in particular, is one of fastest growing regions in regards to population and job growth.”
Sartini said the new properties would be a “seamless complement to our existing regional assets” and that they would be marketed as part of a hub and spoke model revolving around Golden’s distributed gaming assets in the region.
Golden executives said that the enhanced positioning in the Nevada casino market will serve as a foundation for expanding its distributed gaming platform around the country as new markets open up.
“The combined business will be solidly oriented towards Nevada-owned casino assets. However, we believe that distributed gaming continues to be one of the biggest regional gaming growth opportunities outside Nevada,” said Charles Protell, chief financial officer.
“We’re excited about those opportunities in new and existing distributed gaming jurisdictions, and the free cash flow generated from the combined company will undoubtedly help create additional opportunities for us to expand our leading distributed gaming platform,” Protell added.
The Stratosphere projects to play a key role in advancing the company’s efforts to attract younger players, particularly as it comes with 15 acres of excess land that can be developed to bring additional value to the overall property.
“The Stratosphere is the most iconic architectural casino resort building in Las Vegas. It appears on almost all Las Vegas Strip promotional photographs and it offers nice mix of gaming and non-gaming revenues,” said Sartini.
“With its unique thrill ride offerings, the property generates a significant amount of millennial traffic, and we believe that over time we can create additional food and beverage and entertainment options focused on this segment,” he continued.
The $850 million transaction consists of $781 million in cash and four million shares of Golden stock – priced at $17.05. To assist in facilitating the deal, Golden obtained $1.1 billion in commitments to help refinance its existing debt and pay the cash consideration.
The company expects that its debt-to-adjusted EBITDA ratio will be below 5.5x upon closing, which is expected to occur toward the end of this year.
The transaction has been approved by Golden’s Board of Directors and by Whitehall Real Estate Partners, the private equity firm that currently owns AC&E.
