Golden Entertainment has agreed to buy two properties in Laughlin for as much as $190 million as CEO Blake Sartini pursues an aggressive growth strategy.
Golden will acquire Edgewater and Colorado Belle from Marnell Gaming, the company said in a statement Monday. The deal will give Golden the dominant position in Nevada’s third-largest gaming market.
The acquisition comes 13 months after Sartini agreed to buy American Casino & Entertainment Properties for $850 million in a deal that transformed the company from a slot route and pub owner into a mid-sized casino operator. Golden picked up the Stratosphere, Aquarius in Laughlin and two Arizona Charlie’s in that acquisition.
“We view the transaction as a modest positive and part of what we expect to be a broader growth strategy,” said Jefferies analyst David Katz in a note Monday.
Golden shares jumped 6.6 percent to $31.29, near a three-month high, valuing the company at about $850 million.
The Las Vegas-based operator will pay 8 times for the combined trailing 12-months earnings of the two properties, Golden said in the statement. The final price tag will be between $168 million and $190 million, it said. Golden expects cost savings to reduce the multiple to 6.5 times.
The company will finance the transaction with $155 million in cash and the rest in restricted stock priced at $28.54 a share. Marnell Gaming is positioned to receive as much as a 4.2 percent stake in Golden.
The transaction is expected to close in the first quarter of 2019, Golden said.
Golden’s net leverage is expected to be below 5 times earnings before interest, taxes, depreciation, and amortization at closing time.
Marnell on board
Marnell Gaming CEO and Chairman Anthony Marnell III will have the right to sit in on board meetings following completion of the deal and will be nominated to the board at the annual meeting of shareholders next year, according to the statement.
Marnell built the M Resort in Henderson and other casinos around the U.S. and “would be a key partner for Golden” as it looks to develop land adjacent to the Stratosphere, said Union Gaming analyst John DeCree in a note published Monday.
Golden owns 15 undeveloped acres next to the Stratosphere and hasn’t said what it will do with the land.
The two gaming families could combine more assets in the future, DeCree said in his note.
Marnell Group also owns the 1,400-room Nugget in Sparks, “which could represent an additional Nevada acquisition for Golden in the future,” DeCree said.
Laughlin, located 90 minutes from Las Vegas, is a $500 million gaming market growing around 4 percent a year, according to Katz.
He called the Laughlin market “stable” and “undervalued.”
DeCree agreed, saying in his note that the market serves as a “value alternative” to Las Vegas for residents of Arizona and southern California and Clark County locals.
Edgewater and Colorado Belle posses over 1,400 slot machines, 40 table games and 2,150 hotel rooms combined.
They are situated next to the Aquarius, which features over 1,200 slot machines, more 30 table games and almost 2,000 hotel rooms.
The three properties are situated on 55 contiguous acres, according to the company.
“We see upside to the $5 million of estimated cost synergies given the significant operating leverage of having three adjacent properties,” Decree said. “In addition to centralizing corporate functions and purchasing synergies, there are opportunities in labor efficiency, marketing and promotional, and yield management.”
Golden’s Laughlin properties will compete head to head with Tropicana, Harrah’s, Riverside Resort and Laughlin River Lodge.