In what may be a reflection of a compressed sports wagering marketplace, slot manufacturer Light & Wonder will have to accept substantially lower value for its sports betting division, OpenBet, than originally anticipated.
Light & Wonder announced that it would be selling the sports betting aspects of its business to Endeavor for $800 million, 33 percent less than the previously announced $1.2 billion ($1 billion cash plus $200,000 equity participation). LNW still makes the most of the sale in cash, $750 million, with the equity component shorn to $50 million.
Truist Securities analyst Barry Jonas commented, “We’re not surprised to see this, given depressed sports betting valuations (down 70%-80%) since the deal was originally announced last September,” prior to a massive decline in sports betting-centric stocks such as DraftKings.
“We see a higher degree of certainty for the deal closing in Q3 now and note management is not revising its net leverage,” added Jonas, who restated his ‘Buy’ rating on LNW. The stock, which peaked at $90.20, trended moderately upward after the announcement, toward $47.15. The new purchase price, according to Jonas, reflects lower revenue expectations, valuing the OpenBet assets at 6.5 times revenue, versus the earlier 10-times-revenue multiple.
Light & Wonder leadership “highlighted the OpenBet proceeds will enable LNW to continue its journey of deleverage and achieve its goal of 2.5-3.5x (vs. 3.7x [EBITDA] at Q1 end),” reported Jonas.
The company will also waive a requirement that the Nevada Gaming Control Board approve the sale prior to closing, another concession to Endeavor. Jonas expects the sale to be consummated in the second quarter of next year.
