Century Casinos Thursday announced it has entered into a definitive agreement to acquire operations of Rocky Gap Casino Resort in Flintstone, Maryland, from Lakes Maryland Development for approximately $56 million.
When the transaction closes, an affiliate of VICI Properties will acquire the real estate assets for approximately $204 million, and Century Casinos will amend its triple net lease agreement with VICI to add the Rocky Gap property. The amendment to the lease includes an initial annual rent of approximately $15.5 million for the Rocky Gap.
The agreement is subject to certain adjustments. Century Casinos will fund the acquisition using cash from its balance sheet.
“The addition of Rocky Gap is another important milestone in our pursuit to acquire prime U.S. assets,” said Century Casinos Co-CEOs Erwin Haitzmann and Peter Hoetzinger in a joint statement. “With this acquisition and our pending acquisition of the Nugget Casino Resort in Nevada, we will oversee a U.S. portfolio that reaches from East to West. We are looking forward to working with the Maryland Lottery and Gaming Control Agency to obtain gaming approvals and with the casino leadership and team members to affect a smooth transition and great future for Rocky Gap.”
The purchase price for Rocky Gap Casino operations represents an implied 2021 earnings before interest, taxes, depreciation and amortization multiple of 4.9x. The multiple excludes any potential cost synergies and operational improvements and deducts annual rent from the VICI lease from EBITDA. The acquisition is expected to be immediately accretive to Century Casino earnings.
Jeffries Equity Analyst David Katz said in a statement that the deal is “positive for both parties.”
“The non-core asset divestiture at an accretive multiple is a clear positive for the positive capital position for Golden Entertainment,” Katz wrote, “while the incremental growth is a modest positive for VICI. Overall, the transaction and its terms are positive for the regional group overall given the perceived limitations on deal support in the capital markets.”
Analyst David Bain of B Riley Financial also said the deal benefits both parties.
“Synergies for (Century Casinos) include cross-marketing opportunities with its Mountaineer Resort and potentially accretive slot mix/reconfigurations,” Bain wrote. “There are also potential expansion opportunities at Rocky Gap, in our view.”
Rocky Gap is located Rocky Gap State Park, which attracts over half a million visitors annually. The full-service resort is approximately 270 acres and includes an 18-hole golf course designed by Jack Nicklaus, a 5,000 square-foot events center, meeting spaces, and a spa. The property features a 25,000 square foot gaming floor, 630 slot machines, 16 table games, 198 hotel rooms and five food and beverage venues.
The property recently invested $10 million in improvements to its hotel, slot machines, restaurants, and sports lounge, with potential to further expand the casino and hotel. Century also will have the opportunity to partner with a sports betting operator in Maryland at the property.
After closing the Rocky Gap acquisition and the pending acquisition of Nugget Sparks, operator of the Nugget Casino Resort in Sparks, Nevada Century Casino’s North American portfolio will increase to 11 casinos featuring 7,140 gaming machines and 158 table games. On a pro-forma basis after giving effect to the two acquisitions, the Company expects to generate 94% of its Adjusted EBITDA* from its North American casinos.
The transaction is expected to close mid-2023, subject to regulatory and governmental approvals and customary closing conditions.
