Gateway Casinos & Entertainment Limited, known to be one of Canada’s largest operators of land-based casinos, has agreed to merge with special purpose acquisition company Leisure Acquisition Group in a deal valued at $1.115 billion (approx. C$1.463 billion).
The transaction will see Gateway go public and its shares will trade on the New York Stock Exchange. Its tie-up with the special purpose acquisition vehicle will enable it to gain public listing without having to go through an initial public offering (IPO) process.
Under the terms of the deal, Gateway will merge with Leisure and the combined entity will become a new subsidiary of the Canadian operator’s current holding company GTWY Holdings Ltd.
News about the latest consolidation in the North American land-based casino sector emerged on Friday. It also became known that hedge fund HG Vora Capital Management LLC is backing the transaction through a $30 million equity commitment. The hedge fund has so far committed more than $100 million, including previously invested capital, to support Gateway’s growth.
Getway currently operates 25 casino and entertainment properties in British Columbia and Ontario. Those feature more than 12,800 slot machines, 365 table games, and 72 food and beverage outlets. The company also runs two properties in Edmonton, Alberta.
Merger Timeline
The tie-up has already been approved unanimously by the Boards of Directors of both Gateway’s holding company and Leisure. It is expected to close sometime in the second quarter of 2020.
The deal is subject to approvals from Leisure shareholders and regulators as well as to contractual approvals and registrations from Crown agencies, and other customary conditions.
Once the transaction closes, Marc J. Falcone, who currently serves as a Director at Leisure, will step in as CEO of the combined entity. He will replace Gateway’s current Chief Executive Tony Santo, who will retire from the company once his successor’s appointment becomes effective.
Mr. Falcone said that he is excited to enter “this new role as CEO of Gateway” and that he believes the Canadian casino market “offers unparalleled growth opportunities” that will make it possible for him and the rest of the company’s management team to create “significant shareholder value.”
According to initial projections, the transaction will result in Getway generating revenue of $659.3 million (approx. C$865.1 million) in 2020 and of $707.8 million (approx. C$707.8 million) in 2021, and Adjusted EBITDA of $148.6 million (approx. C$195 million) in 2020 and of $163.9 million (approx. $215 million) in 2021.
The merger with Leisure is anticipated to boost Getway’s expansion campaign over the next three years, which is planned to include the opening of three new casinos in Ontario, the relocation of two existing casinos in the province, and the relocation of two existing casinos in British Columbia.
In addition, the casino operator’s current organic growth plan includes the addition of more than 1,900 slot machines, nearly 100 table games, and 15 branded foot and beverage outlets to its existing offering.
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