Shares in Light & Wonder (ASX: LNW) were nudging double-digits, up 9.95 to $169 today after the dual-listed pokies maker announced a major growth by acquisition plan in the United States.
The Caledonia Private Capital-backed company has agreed to acquire the charitable gaming assets (Grover Charitable Gaming) of Grover Gaming and G2 Gaming (Grover Gaming) for $1.05 billion.
The sale consists of US$850 million cash, payable upon transaction closing and subject to customary purchase price adjustments.
Subject to certain financial targets through 2028, there’s also contingent cash consideration of up to US$200 million.
The deal, which is expected to close during 2Q 2025, implies a 7.7-times multiple based on Grover’s adjusted earnings and will be funded by existing cash and debt financing.
Collaboration for four years
Founded in 2013 by owner Garrett Blackwelder, Grover Charitable Gaming has an installed base of over 10,000 leased electronic pull-tab units – aka digital scratchies - across five U.S. states that operate under a recurring revenue (RR) model.
Under the agreement, Grover Gaming says Blackwelder will collaborate with Light & Wonder to drive the business over the next four years.
Matt Wilson, president and CEO of Light & Wonder believes the transaction with Grover Gaming - a leading player in the fast growing charitable gaming category - complements the company’s position as the leading cross-platform global games operator.
"Importantly, there are exciting incremental revenue opportunities to be realised by leveraging Light & Wonder's proven land-based gaming content to a new and loyal customer base," Wilson said.
“We look forward to continuing to partner with Grover Gaming's customers, building on its strong dedication to customer service.”
Highly accretive to value
Light & Wonder also advised the market that the acquisition of Grover Gaming provided “several strategic and financial benefits” to the firm’s shareholders.
The deal “is expected to be highly accretive to value and earnings with high-single-digit adjusted NPATA [net profit after tax adjusted] per share accretion in the first full calendar year post acquisition,” added the gaming supplier.
Light & Wonder is expected to operate the [enlarged] business with Grover Gaming and Light & Wonder employees.
Light & Wonder reaffirmed its US$1.4 billion target for consolidated adjusted earnings this year, without any adjusted earnings contribution from Grover Gaming acquisition.
It’s understood that for the year ended December 31, 2024, on an unaudited and preliminary basis, Grover Charitable Gaming generated revenue of $135 million.
Post acquisition
Light & Wonder’s Q3 2024 results saw revenue rise 12% to US$817 million year-on-year.
Post-acquisition, the company expects its net debt to leverage ratio on a combined basis to remain within its target range of 2.5 times to 3.5 times.
It’s understood that trans-Tasman investment advisory group Jarden has been appointed lead on the deal, while US law firm Cravath, Swaine & Moore provides legal advice.
Light & Wonder has a market cap of A$4.3 billion making it an ASX200 stock; the share price is up 23% in one year and 23% year to date.
While the stock’s 200-day moving average is trending upwards and highlights long-term investor interest in the stock, the 20-day moving average is falling as upward momentum wanes.
Consensus is Moderate Buy.
This article does not constitute financial product advice. You should consider independent advice before making financial decisions.