Bally’s sells Asian interactive business to management
Bally’s Corporation has penned a deal to sell its interactive business in Asia and certain other markets to a company formed by members of its management team.
The deal, penned last Thursday (31 October), involved Bally’s management purchasing the assets for a note, and will see certain intellectual property placed in a trust and licensed to the buyer for a five-year term, subject to extension.
Bally’s will also provide the new company with “certain transition services”, although the operator did not outline specifically what services.
It comes as Bally’s continues towards its own $4.6bn merger with hedge fund Standard General, after it accepted an offer from the business earlier this year.
It is unclear whether Standard General mandated that Bally’s sell the assets as part of that deal.
The company said in an SEC filing: “Bally’s will have no role in the management, operations, or governance of the carved-out business.
“The transaction is intended to allow Bally’s to focus its capital and resource allocation on North American and European business, and this carved out business will benefit from focused management attention and aligned ownership.”
Bally’s asset sale won’t impact EBITDA
The financial impact of the transaction is not expected to materially affect Bally’s adjusted EBITDA or free cash flow, the business said.
Following the deal, Bally’s financial statements will only reflect its licensing and royalty revenues from the buyer, which are expected to be lower than the revenue currently earned from the business unit.
However, the company argued the profitability margins associated with licensing revenue are expected to be higher than is typically standard in the gaming industry for IP licence business models.
An expected modest decline in adjusted EBITDA and free cash flow resulting from the deal will be mitigated via cost cutting, including a simplification of the company’s organisational structure, Bally’s said.
While Asian interactive was a relatively small part of the Bally’s business, it had recently experienced issues, as highlighted by CEO Robeson Reeves in the operator’s Q2 report, released 31 July.
He said: “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.
“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.”
Bally’s will report its Q3 results on Wednesday 6 November.
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