Bally’s agrees to sell Asian interactive business – M&A

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Bally’s Corporation has brokered a deal to sell its interactive business in Asia, though details of the agreement, including the full identity of the buyer, are limited.

Revealed in a Form 8-K filing with the US Securities and Exchange Commission, the deal was agreed on 31 October. Bally’s published the form a day later.

The business in question covers interactive activities in Asia and certain other international markets. Bally’s refers to the operation as the ‘Carved-Out Business’. It has a large presence in Japan, operating four brands – CasinoSecret, Vera&John, InterCasino and Yuugado – in the market.

As for the buyer, the form states this is a company formed by certain management of the Carved-Out Business. The buyer will be acquiring the business in exchange for a note.

CasinoSecret was acquired by Breckenridge Curacao B.V., a business for which Bally’s is the primary beneficiary, according to a 2023 release announcing the acquisition.

Other details set out in the form include certain intellectual property. This has been placed in a trust and will be licensed to the buyer for a term of five years, subject to extension. On top of this, Bally’s will provide the buyer with certain transition services.

However, Bally’s will have no role in the management, operations or governance of the Carved-Out Business.

Bally’s admits Japan struggles in Q2

During the operator’s Q2 earnings call, CEO Robeson Reeves said the group has been facing certain challenges in Japan, including the devaluation of the Yen.

“Capturing new audience has been more challenging,” Reeves explained. “That’s actually been the real issue. That has definitely stifled the sort of willingness to play.

“Every time historically we’ve seen this, we’ve seen demand to come back and it ebbs and flows. But only really a demand basis. The model still works, it still converts. What we’ve shown that even with revenue decline there, we’re still able to convert fairly efficiently down to an EBITDA level, so we’ve got the levers to pull.”

Shareholders raise concerns over Japanese business

There was also reference to Japan when K&F Growth Capital, a major shareholder, responded to Standard General’s takeover for Bally’s. The proposal came in March, with Standard General offering to acquire the remainder of the company for $15 a share.

K&F hit back, saying the proposal “woefully” undervalues Bally’s. Instead, K&F advocated for selling its online assets, noting operations in Japan among possible outgoings. The shareholder noted its concerns about links to Japan and that Bally’s should consider monetising such assets.

“It is our belief that a US public company should not be in the business of supplying gaming equipment and operations to the Japanese market under the country’s current regulatory framework,” K&F said. “In so doing, we believe there are negative implications to Bally’s access to capital.

“Bally’s should pursue a sale or structured separation of the international interactive business as the universe of potential acquirers is expansive (across both strategic and private equity parties).”

Standard General ultimately prevailed, agreeing a deal to take over Bally’s in July this year.

Bally’s set for North America and Europe focus

As to why Bally’s has decided to sell up, it states the deal will allow it to focus on other areas of its wider business. This includes its operations across North America and Europe.

“The transaction is intended to allow Bally’s to focus its capital and resource allocation on North American and European business,” Bally’s said. “This Carved Out Business will benefit from focused management attention and aligned ownership.”

As for financial impact, Bally’s does not expect the deal to be material to adjusted EBITDA or free cash flow. Financial statements moving forward will only reflect licensing and royalty revenues from the buyer.

Such fees, Bally’s said, are likely to be lower than revenues under the current accounting treatment. However, profitability margins associated with those licensing revenues are set to rise, “as is customary in the gaming industry for IP licence business models”, Bally’s said.

“The expected modest decline in adjusted EBITDA and free cash flow resulting from the transaction are expected to be mitigated by cost actions to simplify Bally’s organisational structure and other cost reductions,” Bally’s added.

Bally’s confirms plans for new Las Vegas property alongside A’s ballpark

Part of Bally’s focus on North America is its new property in Las Vegas. Last month, chairman Soo Kim confirmed it is working on plans to open the first phase of the facility to coincide with the completion of the Oakland Athletics’ new stadium on the same site.

In comments to the Las Vegas Review-Journal, Kim said Bally’s is “working pretty hard” to finalise plans to “at least build Phase 1 and open at the same time as the ballpark”. The A’s new 33,000-seat stadium is due to open in the spring of 2028.

Phase 1 will include a casino, certain restaurants and food and beverage, as well as a hotel tower. More guest amenities and hotel rooms will open as the project progresses.

Construction for both projects is moving forward after the Tropicana Las Vegas was imploded on 9 October.

Bally’s is this week due to publish its Q3 results. The announcement is due on 6 November.

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