Endeavor Purchases Scientific Games’ OpenBet for $1.2 Billion
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On Monday, Endeavor Group Holdings Inc. announced that it would acquire the sports betting business OpenBet from Scientific Games Corporation for $1.2 billion. The transaction will be in the form of $1 billion in cash and $200 million of Endeavor Class A common stock. Endeavor stock (NYSE: EDR) has been up 9.47% over the past five days. The OpenBet transaction is expected to close in the second quarter of 2022, subject to regulatory approvals and closing conditions.
Combination of OpenBet and IMG Arena
Endeavor plans to combine OpenBet with its existing sports betting business, IMG Arena. The integrated platforms will provide clients with an end-to-end solution providing data, video streams, mobile products, technology solutions, and other content for leagues, federations, and sportsbooks worldwide. OpenBet is currently the leading business-to-business sports betting partner in the US, UK, Australia, and Canada, with a top position in Europe and APAC.
IMG Arena currently works with 470 leading sportsbook brands worldwide to provide official live streaming video and data feeds for more than 45,000 sports events annually. OpenBet has over 75 global customers with 24 sportsbooks across 12 states, including BetFred, BetMGM joint venture partner Entain, Golden Nugget, WynnBET, FanDuel Sportsbook, and Fox Bet parent company Flutter. These two companies will provide a robust ecosystem of content, technology, and other services.
In 2022, IMG Arena and OpenBet are expected to combine for $340 million in revenue, per Endeavor’s Chief Financial Officer Jason Lublin. That’s before potential synergies are taken into consideration, and OpenBet will add an expected $150 million in proforma revenue. The new partnership should allow both companies to grow in market share and provide even more income to Endeavor.
Need for Scientific Games to Sell
Scientific Games is a Las Vegas-based slot machine maker that has a significant debt problem. As of June 30, Scientific Games reported $8.2 billion in net debt on its Q2 returns, and that’s down from $9.1 billion in the prior quarter. Different options were discussed, such as an IPO or sale of various properties, as the company has felt pressure from its board members to reduce its debt and deleverage its balance sheet.
Scientific Games previously announced its plan to divest its lottery and sports betting businesses to deleverage and pivot to a gaming and digital content provider. CEO Barry Cottle described the sale of OpenBet as an effort to establish a “healthy balance sheet and dry powder to really lean in on games.” He also said the transaction allows the company to optimize its portfolio and de-lever its balance sheet to enhance its financial flexibility.
What’s Next For These Companies?
Endeavor CEO Ariel Emanuel described how “the combination of OpenBet and IMG Arena business will enable [the company] to expand [its] footprint across the entire sports betting value chain.” With sports betting continuing to be legalized in a number of new states and the industry as a whole rapidly growing, this transaction puts Endeavor in a unique position to provide value to its partners. Meanwhile, Scientific Games will transition to a company focused on content-led growth and could continue to offload other properties to make that possible.
