Bally’s Selling Asia Digital Gaming Operations

Posted on: November 1, 2024, 06:00h. 

Last updated on: November 1, 2024, 06:00h.

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

Bally’s (NYSE: BALY) said it is selling its Asian interactive gaming business, which also operates in other markets, to a group comprised of executives from the to-be-divested entity.

bally's
Bally’s on the Atlantic City Boardwalk. The company is selling its Asian interactive unit. (Image: Press of Atlantic City)

Financial terms of the transaction weren’t disclosed, but Bally’s noted the sale will be “neutral” to its earnings before interest, taxes, depreciation, and amortization (EBITDA). The regional casino operator announced the deal in a Form 8-K filing with the Securities and Exchange Commission (SEC) earlier today.

The financial impact of the transaction is not expected to be material to Adjusted EBITDA or free cash flow of the Company,” said Bally’s in the regulatory document. “Going forward, the financial statements of the Company will only reflect licensing and royalty revenues received from the Buyer, which are expected to be lower than revenues under the current accounting treatment, but the profitability margins associated with those licensing revenues are expected to be higher as is customary in the gaming industry for IP license business models. 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 organizational structure and other cost reductions.”

The seller added the divestment of its Asian digital operations will allow it direct focus and resources to comparable operations in Europe and North America.

Bally’s Was Previously Bullish on Asia

When examining Bally’s online gaming business, the UK segment stands out as the clear leader with the aforementioned Asia unit being a laggard relative to the UK and North America.

Following the company’s second-quarter earnings report in August, CEO Robeson Reeves highlighted strength in the UK digital operations while acknowledging some issues in Asia, but he was optimistic a turnaround in Asia was possible.

“Outside the UK, our business in Asia was challenged in the quarter as we continue to work through several logistical and operational hurdles which directly impacted players,” he said on a conference call with analysts. “We believe the Asian Interactive market remains an attractive opportunity and we will continue to work to manage and grow our position in this important region.”

Rhode Island-based Bally’s delivers third-quarter results on Wednesday, Nov. 6. It’s possible that at that time, the company will provide more color on the Asia sale.

Asia Sale Could Help Renew Focus

Standard General — the hedge fund that’s Bally’s largest shareholder — is in the process of acquiring the casino operator. It’s not clear if the buyer prompted the sale of the Asian interactive business, but with that combination looming, now would be an opportune time to shed underperforming assets.

Additionally, the sale of the Asian business could pave the way for the seller to focus on important land-based projects, including construction of its permanent casino hotel in Chicago and a new integrated resort at the former site of the Tropicana on the Las Vegas Strip.