Bally’s Corporation tables £2bn offer for Gamesys Group

US casino giant Bally’s Corporation has continued its ambitious M&A spree by launching a £2bn takeover of Gamesys Group.

Bally’s has tabled a cash offer which would see Gamesys’ shareholders receive 1,850p per share in the London-listed business.

The 1,850p per share offer was calculated in three parts.

The first, representing 12.7%, corresponds to Gamesys’ closing price on 23 March (1,642p), the last trading day prior to the announcement of the offer.

The second, representing 39.1%, corresponds to Gamesys’ closing price on 25 January (1,330p), the last trading day prior to Bally’s initial proposal.

The final part, representing 34.7%, corresponds to Gamesys’ three-month average share price of 1,373p.

Bally’s has also offered the option of a share alternative, which would see Gamesys’ shareholders trade one Gamesys share for 0.343 in shares of the newly combined company.

If the share alternative option is elected as the preferred choice by Gamesys’ shareholders, the maximum cash consideration would fall to £1.6bn.

The Gamesys board has indicated to Bally’s that is it “minded to recommend” the cash offer to its shareholders. Founding investors Noel Hayden, Andrew Dixon and Robin Tombs, as well as Gamesys CEO Lee Fenton and COO Robeson Reeves have already indicated their support for the takeover.

If the merger is approved the combined group would be headquartered in Rhode Island and would retain its listing on the New York Stock Exchange with a renewed focus on the high-growth US igaming and betting market.

Gamesys CEO Fenton would become the CEO of the combined group to be joined by two further Gamesys directors on the Bally’s board.

Bally’s CEO George Papanier would stay on as a member of the new board and would continue to manage the group’s retail casino business.

In a statement, Bally’s and Gamesys said: “The two companies believe that the possible combination represents a compelling strategic and financial opportunity to improve the offering and experience for customers.”

The pair went on to state a combined group would “accelerate Bally’s long-term growth strategy” of becoming an omni-channel B2B2C business.

Additionally, Bally’s said the merger would allow the group to benefit from Gamesys’ “proven technology platform” and it would allow the combined group to “further build out igaming offerings”.

The statement concluded: “The combined group is expected to be highly cash flow generative, enabling it to pursue growth opportunities through reinvestment and strategic M&A.

“The greater number of registered accounts and monthly active customers that would result from the possible combination, together with a more diversified player community and an enhanced customer database, is expected to create opportunities to increase growth and profitability.”

Soo Kim, Bally’s chair, said: “We believe that this combination would mark a transformational step in our journey to become a leading integrated, omni-channel gaming company with a B2B2C business.

“We think that Gamesys’ proven technology platform alongside its highly respected and experienced management team, combined with the US market access that Bally’s provides, should allow the combined group to capitalise on the significant growth opportunities in the US sports betting and online markets.

“We are truly excited about the opportunities that this combination would offer and the enhanced and comprehensive experience and product offering that it would enable us to offer our customers,” he added.

Earlier this month, Gamesys reported a 29% uptick in full-year revenue to £727.7m. The company is reliant on gaming revenue from the UK and its recent gaming growth has come from Japan.

At present, Gamesys Group boasts a market cap of £2.1bn. Its share price surged more than 18% to 1,948p on the takeover announcement.

Fenton said: “From our first meeting to now it has been the entrepreneurial energy of the two businesses that has brought us to the edge of creating a uniquely powerful company.

“Our shared passion and vision to capitalise on technology disruption to better serve our customers, wherever they may be, should make for an exciting journey for our employees, customers and shareholders alike,” he concluded.

Since November 2020, Bally’s has actioned a comprehensive M&A roadmap, including the purchases of Bet.Works for $125m, which formed the creation of a new online interactive division.

Since then, the US casino operator has also pulled off deals for DFS disruptor Monkey Knife Fight for $90m and the undisclosed purchase of free-to-play CRM business SportCaller.

Responding to news of the deal, Peel Hunt analyst Ivor Jones said: “The logic of the takeover is compelling in our view, creating a true omnichannel US gambling company, after a process of corporate and technology integration.”

The London-based investment bank increased its target price to 1,878p to reflect the value of the cash offer plus an additional 28p for the full-year 2020 financial dividend, while downgrading the firm from a Buy to a Hold rating.