Century Casinos (NASDAQ:CNTY) and VICI Properties (NYSE:VICI) are teaming up to buy the Rocky Gap Casino Resort in Flinstone, Md. from Golden Entertainment (NASDAQ:GDEN) for $260 million in cash.
Century is paying $56 million for the operating rights to the venue while VICI is shelling out $204 million for the real estate assets of the property located in Rocky Gap State Park. The casino operator and the real estate investment trust (REIT) will amend a previously existing lease accord to include the Maryland casino, including initial annual rent of $15.5 million.
The purchase price for the casino operations represents an implied 2021 earnings before interest, taxes, depreciation and amortization (EBITDA) multiple of 4.9x,” according to a statement issued by Colorado-based Century.
The transaction, which is expected to be immediately accretive to Century’s earnings per share and close in mid-2023, fits the buyer’s track record of bolt-on acquisitions that often work in favor of the company and its investors.
Deal Benefits Century and Golden
The Rocky Gap sale affords both Century and Golden opportunities to hone their portfolios. In the case of the buyer, pending the Maryland transaction and the previously announced $195 million purchase of the Nugget Sparks casino in Sparks, Nevada, its portfolio will expand to 11 venues while North America will represent 94% of its revenue, up from 78% in 2019.
“Synergies for CNTY include cross-marketing opportunities with its Mountaineer Resort and potentially accretive slot mix/reconfigurations. There are also potential expansion opportunities at Rocky Gap, in our view,” wrote B. Riley analyst David Bain in a note to clients today.
He has “buy” ratings on both Century and Golden Entertainment.
Regarding Golden, the Maryland sale highlights the value of gaming companies retaining ownership of the real estate on which their casino-resorts reside. The Strat operator is fetching 10x adjusted property EBITDA for the trailing twelve-month period ended June 30, 2022. The $260 million sale price is a hefty percentage of Golden’s market capitalization of $1.15 billion, confirming the company’s property assets may not be fully appreciated by investors — a thesis long held by some analysts.
By divesting the Maryland venue, Golden’s portfolio will be entirely comprised of Nevada gaming properties, including those in Las Vegas, Laughlin and Pahrump.
Other Perks for Century and Golden
Rocky Gap Casino Resort features over 25,000 square feet of gaming space, 630 slot machines, 16 table games, 198 hotel rooms and five. It generated $27 million in EBITDA on sales of $78 million last year.
Golden recently poured $10 million into enhancing the venue and Century acknowledged there are avenues to expand the casino and the hotel and opportunities for the company to identify a sports betting partner to capitalize on what’s expected to be lucrative sports wagering market in Maryland.
For Golden, the deal bolsters an already strong balance sheet, potentially paving the way for more share buybacks and perhaps deal-making of its own. Bain, the B. Riley analyst, notes it’s possible the operator sets its sites on Reno for a possible acquisition.
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