Bally’s (NYSE: BALY) said that it is selling its Asian interactive gaming company, which also operates in other areas, to a group of executives from the to-be-divested firm.
The financial details of the purchase were not released, although Bally’s stated that the sale will be “neutral” to its earnings before interest, taxes, depreciation, and amortization (EBITDA). The regional casino operator disclosed the transaction in a Form 8-K filing with the Securities and Exchange Commission (SEC) earlier today.
“The financial impact of the transaction is not expected to be material to Adjusted EBITDA or free cash flow of the Company,” Bally’s stated in the regulatory document. “Going forward, the Company’s financial statements will only reflect licensing and royalty revenues received from the Buyer, which are expected to be lower than revenues under the current accounting treatment, but the profit margins associated with those licensing revenues are expected to be higher, as is customary in the gaming industry for IP license business models. The transaction’s estimated small decline in Adjusted EBITDA and free cash flow will be offset by cost actions to streamline Bally’s organizational structure, as well as other cost savings.”
The seller claimed that divesting its Asian digital assets will allow it to devote more emphasis and resources to equivalent activities in Europe and North America.
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When assessing Bally’s online gaming business, the UK section emerges as the clear leader, with the aforementioned Asia unit trailing behind the UK and North America.
Following the company’s second-quarter financial release in August, CEO Robeson Reeves emphasized the strength of its UK digital business while noting some challenges in Asia, but he remained optimistic that a reversal was feasible.
“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,” he said with analysts during a conference call. “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.”
On Wednesday, November 6, Rhode Island-based Bally’s will report its third-quarter earnings. It’s probable that at that point, the business will give further information about the Asia sale.
Asia Sale May Help Renew Focus
Standard General, Bally’s largest stakeholder, is in the process of acquiring the casino operator. It’s unclear whether the buyer prompted the sale of the Asian interactive firm, but with that combination coming, now would be a good moment to sell failing assets.
Furthermore, the sale of the Asian business may allow the seller to focus on major land-based initiatives, such as the construction of a permanent casino hotel in Chicago and a new integrated resort at the former Tropicana site on the Las Vegas Strip.
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