New York–based investment firm Everbay Capital has sent a letter to Golden Entertainment’s board raising serious concerns about last week’s announcement that the company’s CEO, Blake Sartini, plans to purchase the business. Everbay Capital argues that the proposed price of $2.75 per share for the remaining company, following the real estate divestiture, significantly undervalues its assets.
Everbay Capital Rings the Alarm on Golden Entertainment Buyout
The firm has urged the board to provide additional disclosures and revise the master transaction agreement to secure a more favorable outcome for shareholders. Everbay Capital further argued that “any knowledgeable executive familiar with the gaming industry would recognize this as an unattractive valuation multiple.”
Everbay also noted that the timing of the transaction appears strategic, occurring just two days after Golden’s stock price reached a four-year low. Additionally, the firm suggested that the deal reflects an opportunistic effort by the CEO to capitalize on the company’s depressed share price to acquire RemainCo at a steep discount, funded by the sale of Golden’s valuable real estate assets.
Everbay contrasted the proposed deal with MGM’s recent sale of its MGM Northfield Park operations to Clairvest Group at a 6.6x EBITDA multiple, announced on October 16. The firm estimated that applying a comparable multiple would value RemainCo at roughly $15.80 per Golden share, which is far above the proposed $2.75.
The investment firm’s letter comes after last week Colden Entertainment announced it’s selling its operating assets to its CEO and founder, Blake Sartini. Additionally, the company has reached an agreement with VICI Properties Inc. to sell several of its casino real estate properties.
What Else Is Everbay Capital Worried About?
Everbay Capital’s letter additionally highlighted several concerns regarding the structure of the transaction, particularly the bundling of the real estate and operations sales into a single agreement. Everbay contends that this arrangement effectively compels shareholders to accept an undervalued price for RemainCo in order to sell the real estate. The firm also questioned whether a comprehensive sale process was conducted for RemainCo before agreeing to sell it to Sartini.
Everbay proposed multiple changes to the agreement, including separating shareholder votes for the real estate and RemainCo transactions, extending the go-shop period from one month to three, and removing the termination fee if the deal is terminated during the go-shop period due to a superior offer.
Additionally, the firm requested that the RemainCo transaction require approval from a majority of Golden’s unaffiliated shareholders. Under the current structure, the overall transaction values Golden Entertainment at $30 per share, with approximately 90% of the consideration in the form of Vici Properties shares.