Bally’s $2.7 Billion Gamesys Deal Confirmed, Analysts Laud Acquisition

Posted on: March 25, 2021, 09:29h. 

Last updated on: March 25, 2021, 10:49h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Bally’s Corp. (NYSE:BALY) and Gamesys (OTC:JKTPF) are confirming a $2.7 billion takeover by the casino operator of the British online gaming firm. It marks one of the buyer’s largest acquisitions to date.

Bally's Gamesys
The Bally’s Atlantic City building towers above Caesars. The operator’s deal for UK-based Gamesys is earning adulation. (Image: News 12 New Jersey)

In a regulatory filing with the Securities and Exchange Commission (SEC) on March 23, Bally’s revealed it made an offer for Gamesys, saying at the time a deal was reached in principle. Late Wednesday, the UK-based company issued its own filing, endorsing the transaction.

The Gamesys board and Bally’s board believe that the possible combination has a compelling strategic and financial rationale, would create long-term value for both Gamesys and Bally’s, and would be consistent with Bally’s Gamesys’ respective long-term growth strategies,” said the target in the regulatory document.

While Bally’s is one of the most acquisitive gaming operators, the bulk of its deals revolve around boosting its US footprint — either with land-based casinos or online sports wagering assets. With Gamesys, the buyer gains entry into the UK’s vibrant iGaming market.

Analysts Applaud Bally’s Gamesys Buy

Bally’s latest purchase is drawing praise from sell-side analysts, with one saying it’s another step in the buyer’s omnichannel ambitions, and another saying it could prove to be one of the acquirer’s most exciting deals to date.

“While the financial merits of the deal are compelling, the strategic logic behind the merger could make this deal BALY’s most exciting endeavor yet,” said Union Gaming analyst John DeCree in a note.

He points out that Gamesys trades at a discount to rivals because it lacks a US footprint and a sports betting platform — two gaps Bally’s fills with ease. The analyst says Gamesys will benefit from Bally’s recent acquisition of technology provider Bet.Works and the casino operator’s deal with Sinclair Broadcasting to put the Bally’s brand on 21 regional sports networks (RSNs).

“BALY is one of the last major US casino companies with significant market access, making it an ideal partner for GYS looking to scale in the nascent US digital gaming industry,” adds DeCree.

The analyst lifts his price target on Bally’s stock to $110, implying upside of almost 62 percent from the March 24 close.

Good Deal for Bally’s

Pursuant to UK law, Bally’s has until April 21 to formalize a proposal for Gamesys, but with both companies’ boards endorsing the transaction, bringing the deal across the finish line appears likely.

Adding to the allure of Gamesys for Bally’s, the buyer is getting free cash flow-generating international operations at a fair price.

“With the total purchase price set at ~2.5x 2022E revenues (per Factset), we believe BALY is effectively paying fair price for Gamesys’s international operations, with 100% upside thereafter as BALY leverages the technology and seasoned management team here in the US,” said Stifel analyst Steven Wieczynski in a note.

The analyst adds the target averages 90 percent-plus free cash flow conversion, giving Bally’s a cash cow to use to fund further expansion in the US.

He reiterates a “buy” on Bally’s stock while lifting his price forecast to $75 from $70.