Light & Wonder Accepting Lower Price on OpenBet Sale to Endeavor

Posted on: June 30, 2022, 04:20h. 

Last updated on: June 30, 2022, 04:34h.

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

Light & Wonder (NASDAQ:LNW) and Endeavor Group Holdings, Inc. (NYSE:EDR) are amending their accord pertaining to the previously announced sale of the OpenBet sports wagering business. It now indicates the seller will accept $800 million — significantly lower than the original price of $1.2 billion.

OpenBet
Scenes from a recent UFC fight. Parent company Endeavor is paying less than expected for Light & Wonder’s OpenBet unit. (Image: Twitter)

The original pact was struck last September when Light & Wonder, then operating as Scientific Games, said it was selling OpenBet to Endeavor for $1.2 billion in cash and stock.

Under the terms of the amended purchase agreement, Light & Wonder will receive $750 million in cash and $50 million in Class A common stock of Endeavor Group Holdings, Inc., based on the volume weighted average price of such stock in the twenty days before the date of the amendment,” according to a statement.

Originally, Endeavor was to pay $1 billion in cash and $200 million in equity. On the basis of the $800 million sale price, Light & Wonder will receive $700 million in after-tax proceeds. The transaction is expected to close in the third quarter.

Light & Wonder Still on Pace to Slash Debt

Light & Wonder agreed to sell OpenBet and later its lottery unit in an effort to reduce its debt burden. Although it’s accepting a lower price on the sports wagering technology business, the company remains on track to lower its liabilities.

“The recently completed Lottery sale and the pending sale of OpenBet will cumulatively generate approximately $5.6 billion of estimated net after-tax proceeds,” according to the statement.

By shedding the aforementioned businesses, L&W previously noted that its debt burden is now $4 billion, down from $8.8 billion.

As a result of the debt reduction, Light & Wonder reduced its net debt leverage ratio to 3.7x from 6.2x, putting the company on pace to reach its desired net debt leverage ratio range of 2.5x to 3.5x. With interest rates rising and inflation soaring, the slot machine manufacturer is shoring up its balance sheet at exactly the right time.

“The significant cash consideration from the OpenBet sale will enable us to further de-lever our balance sheet and achieve our Targeted Net Debt Leverage Ratiorange of 2.5x to 3.5x,” notes L&W CEO Barry Cottle.

The slot machine manufacturer is hoping to have $10 billion in available capital by 2025.

Options for OpenBet

OpenBet will likely be folded into Endeavor’s Owned Sports Properties segment, which includes UFC, the Professional Bull Riders (PBR), and Euroleague.

“To date, OpenBet has over 75 global customers, including 46 sports books across 12 states, and a 100% uptime record across major sporting events,” said the companies in the media release.

OpenBet clients include DraftKings, FanDuel, William Hill, and WynnBet.