Tilman Fertitta’s Golden Nugget Strikes $6.6 Billion Merger with SPAC FAST Acquisition

Posted on: February 1, 2021, 07:09h. 

Last updated on: February 1, 2021, 10:37h.

Todd Shriber @etfgodfather Read More

Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Fertitta Entertainment confirms today that it’s merging with blank-check firm FAST Acquisition (NYSE:FST) in a deal valuing the leisure and hospitality company at $6.6 billion. Fertitta Entertainment is the entity controlling the Golden Nugget land-based casinos and Landry’s restaurants.

That $6.6 billion valuation is equivalent to 9.25x the target’s estimated 2022 pro forma earnings before interest, taxes, depreciation and amortization (EBITDA) of $648 million. The transaction includes “voting control and ownership by the Company of approximately 31 million shares, or nearly half of all outstanding shares in Golden Nugget Online Gaming (NASDAQ:GNOG).”

GNOG is Fertitta’s online casino business, which went public last December following a merger with a special purpose acquisition company (SPAC) he and investment bank Jefferies controlled.

“Tilman Fertitta, sole owner of Fertitta, will continue to lead the Golden Nugget/Landry’s empire and serve as the chairman, president and CEO of the company,” according to a statement. “Mr. Fertitta will also be the company’s largest shareholder, with an approximately 60 percent interest in the company and stock valued upon the closing of the transaction in excess of $2 billion dollars.”

Institutional investors are committing $1.2 billion in private investment in public equity (PIPE) financing at a price of $10 per share of FAST common stock, and the SPAC is contributing $200 million in cash in a trust, “assuming no redemptions.”

Shares of FAST traded higher by more than 20 percent in Monday’s pre-market session on news of the deal. The merger is slated to close in the second quarter.

Different Route for FAST

FAST Acquisition, a blank-check company co-headed by Doug Jacob and Sandy Beall, went public last August. At that time, it was expected the firm would pursue transactions with fast food or fast-casual dining enterprises, given the founder’s ties to the restaurant industry.

Rumors of a possible agreement with Fertitta surfaced last month, and FAST will be involved in a dining merger of sorts, because Landry’s owns more than 500 restaurants across the Bubba Gump’s, Chart House, Del Frisco’s, Mastro’s, and Morton’s brands, among others. The SPAC wasn’t thought to be hunting for gaming assets, but five Golden Nugget casinos are included in the transaction.

In fact, the gaming venues can be viewed as the jewels in the merger, given the adverse impact the coronavirus pandemic is having on in-person dining. Locations include two in Southern Nevada, and one each in Louisiana, Mississippi, and New Jersey.

While the health crisis is clearly pinching brick-and-mortar casinos, Golden Nugget notched “over 41 percent land-based casino Adjusted EBITDA margins in Q3 2020, a nearly 10 percent increase over Q3 2019, despite limited capacity due to COVID-19 restrictions,” according to the company.

The inclusion of a controlling stake in GNOG carries cache for FAST investors, because Fertitta’s iGaming enterprise has been profitable in New Jersey — its marquee market — for the past five years, and is rapidly entering new states.

Smart Move by Fertitta

Rumors of Fertitta’s interest in returning the Golden Nugget/Landry’s operations to public markets surfaced late last year. So did speculation that a traditional initial public offering (IPO) could be difficult to execute due to weakness in the restaurant industry and the company’s $4 billion in debt. Fertitta took the Golden Nugget/Landry’s business private in a 2010 leveraged buyout.

A SPAC transaction quells those headwinds and is a more rapid avenue for accessing public markets than a standard IPO.

“After I compared the opportunities provided by a transaction with FAST, versus the traditional IPO route, it became abundantly clear that we could access the capital markets with more certainty and speed if we did a deal with FAST,” said Fertitta in the statement.

When the transaction is finalized, the Houston Rockets owner will control 60 percent of the company, the PIPE investors will have a 35 percent stake, with one percent going to FAST sponsors. The remaining four percent will be sold to public investors.