- »Gateway Casinos to Restructure for $1.1B NYSE Listing
Gateway Casinos to Restructure for $1.1B NYSE Listing
Just days before the end of 2019, Gateway Casinos announced an agreement with Leisure Acquisition, the latter becoming a subsidiary of the former. Essentially, Gateway is restructuring.
Other changes, including Leisure Director Marc Falcone taking over as CEO and President of Gateway, will follow when the transaction is completed in its entirety.
Overview of Transaction
Gateway Casinos & Entertainment of Canada and Leisure Acquisition will combine their businesses so that Leisure will merge into a wholly-owned subsidiary of the Gateway.
Currently, Gateway is majority-owned by the Catalyst Capital Group and Leisure.
The combined companies will be valued at approximately C$1.463 billion (US$1.115 billion).
Catalyst will continue to support the company, alongside HG Vora Capital Management, the latter of which will commit US$30 million in equity. This will add to its previous $100K investment.
Gateway first opened in 1992 with two casinos in Vancouver. In the years that followed, the company acquired casino properties in Alberta, opened Cascades Casinos in 2005, and continued to grow. IN 2015, Gateway purchased Playtime Gaming with its four gaming centers and two bingo halls.
The British Columbia company was then the largest of its kind in British Columbia but expanded further by purchasing 11 Ontario casinos in 2016. And two years later, Gateway took over the operations of several casinos run by Ontario Lottery & Gaming. In 2018, Gateway opened its first Playtime Casino in Kelowna and then won a bid to become the service provider for the Central Gaming Bundle of OLG slots.
As it stands at the time of the restructuring announcement, just after celebrating 25 years in business, Gateway owns 25 gaming properties in British Columbia and Ontario and two in Alberta. The company employs more than 8,200 people.
Leisure Acquisition was formed for the purpose of the Gateway reorganization.
Current Leisure Director Marc Falcone will take on the role of Gateway President and Chief Executive Officer when the transaction is complete.
Anthony Santo, who currently serves as Gateway CEO, will retire when Falcone takes over. However, Santo will be an advisor to the board and Falcone for three months further to assist in the transition.
Falcone will take a place on the Board of Directors, too, as will Leisure executives A. Lorne Weil and Daniel Silvers. Others to join are listed as Lyle Hall, Olga Ilich, and Dr. Michael Percy.
Having served on Leisure’s board since December 2017, Falcone was also the President and CEO of Sightline Payments since February of this year. His background includes stints in the upper ranks of executives at Red Rock Resorts, Station Casinos, Fertitta Entertainment, and Goldman Sachs. His portfolio of investments includes gaming companies, such as Kentucky Downs (horse racing machines).
Falcone noted, “I am excited to enter this new role as CEO of Gateway. I am grateful for the confidence placed in me by Gabriel, HG Vora and the leadership of Leisure. I believe the Canadian gaming market offers unparalleled growth opportunities, and Gateway has always been a platform that I found to be highly compelling. I look forward to creating significant shareholder value alongside the rest of the Gateway management team.”
The latest numbers delivered by Gateway indicated a strong 2019, with the recent quarter ended September 30, 2019 showing adjusted EBITDA growth of 10.8% to C$137.9 million (US$103.7 million).
In the next three years, Gateway expects to finish four property relocations and complete the rebranding and renovation of several other properties. This allows for projections for 2020 to be C$195 million (US$148.6 million) adjusted EBITDA.
Gateway is also counting on other significant capital investments in the past several years to produce results in 2020 and beyond. Specifically, the projects include three new casinos in Ontario, two casinos relocated to Ontario and another two to British Columbia. In all, Gateway plans to add another 1,900 slot machines to its current total of 13,915 slots, nearly 100 table games to its current 440, and 15 branded outlets to its current tally of 93 food and beverage outlets.
Predictions for future financials were provided as follows:
- Year ending December 31, 2020 revenue = C$865.1 million (US$659.3 million)
- Year ending December 31, 2021 revenue = C$928.7 million (US$707.8 million)
Upon the close of the merger, outstanding shares of Leisure will be converted into the availability of Gateway shares at a 1-to-1 rate. Shares will be listed on the New York Stock Exchange as GTWY.
Gateway expects to finalize the transaction in the second quarter of 2020. Leisure and Gateway boards have approved the deal, but Leisure shareholders must do the same. Appropriate gaming regulators must approve, including and importantly the Ontario Lottery and Gaming Corporation.
Gateway Executive Chairman Gabriel de Alba commented on the many growth initiatives and plans to deliver additional shareholder value, as well as the incoming CEO Marc Falcone. “This transaction will provide Gateway with the foundation for a very promising future as a leading, diversified gaming and entertainment platform throughout North America.”