Posted on: March 5, 2021, 10:14h.
Last updated on: March 5, 2021, 10:29h.
Allied Esports Entertainment (NASDAQ:AESE) confirmed today it received a $100 million takeover offer from Bally’s Corp. (NYSE:BALY). That means it would be forced to end a plan to sell a unit that owns the World Poker Tour (WPT) if the buyout bid is accepted.
Allied Esports investors apparently don’t like the Bally’s offer, because the stock is down more than 22 percent in midday trading. The $100 million proposal is well below the California-based company’s market capitalization of $131.58 million. The target says it can take cash, Bally’s equity, or a mixture of both.
Investors’ lack of enthusiasm for the offer may be related to the stipulation that the previously announced WPT sale be scrapped.
The Bally’s proposal would require the Company to terminate its previously announced agreement with Element Partners, LLC to sell all of the equity interests of Club Services, Inc. (CSI) an indirect wholly-owned subsidiary of the Company that directly or indirectly owns the Company’s poker-related business and assets, including the entities comprising the WPT for consideration totaling $78,250,000,” according to a statement.
That figure includes $68.25 million in cash and a “fully guaranteed revenue share of 5% of WPT-branded tournament entry fees on Element-owned or licensed gaming platforms, up to a maximum of $10 million, payable over three years after closing.”
Allied Esports announced the WPT sale in mid-January, noting at the time it expected the transaction to close late that month or in February.
Bally’s Being Bally’s
As is widely known, Bally’s is one of the most acquisitive companies in the gaming industry, and it frequently looks for bolt-on deals at affordable price points in an effort to push into new arenas.
Since last November, the Rhode Island-based casino operator announced three purchases bolstering its sports betting technology stack and exposure to daily fantasy sports (DFS) and predictive games. A deal for sports tech platform provider Bet.Works is valued at $125 million, while terms for buys of DFS operator Monkey Knife Fight (MKF) and free-to-play games firm SportCaller are undisclosed.
Bally’s interest in Allied is sensible because the former has some esports exposure. Allied owns HyperX, which controls an esports arena at the Luxor on the Las Vegas Strip, among other esports-related assets.
The company also has an expansive portfolio of original and third-party esports programming. That’s relevant to any suitor, including Bally’s, because over the next several years, television viewership of gaming tournaments is expected to exceed that of all major traditional sports leagues except the NFL.
Signs Were There
There were indication that something was afoot with Allied Esports. The stock closed around $2 at the end February, only to vault above $3.50 yesterday, and it’s higher by almost 69 percent over the past month.
The company said it will mull Bally’s offer and discuss possible updates with Element regarding the WPT agreement.
“There can be no assurance that the company will enter into a definitive agreement with Bally’s or consummate any transaction with Bally’s,” according to the statement.