8-K: Accel Entertainment Completes Acquisition of FanDuel Sportsbook & Racetrack, Expanding into Local Gaming

Accel Entertainment has successfully acquired Fairmount Holdings, owner of the FanDuel Sportsbook & Racetrack in Collinsville, Illinois, marking its entry into the local gaming market.

Summary

• Accel Entertainment has finalized its acquisition of Fairmount Holdings, which owns the FanDuel Sportsbook & Racetrack in Collinsville, Illinois.
• The acquisition includes the only active horse racing venue in the St. Louis metropolitan area, an Organization Gaming License for casino gaming, and a partnership with FanDuel for sports wagering.
• Accel acquired Fairmount for 3.45 million ACEL shares, excluding adjustments for net working capital.
• The company plans to invest $85-95 million in Phase I and Phase II casino construction and track improvements.
• Fairmount generated $29 million in revenue and modest Adjusted EBITDA in 2023.
• Accel projects an Adjusted EBITDA potential of $20 to $25 million and over 75% free cash flow conversion within five years.
• The Phase I casino is expected to open in Q2 2025.

Sentiment

Score: 8

Explanation: The document conveys a positive outlook with a strategic acquisition, clear development plans, and strong financial projections. The company is confident in its ability to execute and generate returns.

Positives

• The acquisition expands Accel's footprint into the local gaming market.
• The deal includes a unique asset with a horse racing venue, casino license, and sports betting partnership.
• The projected Adjusted EBITDA and free cash flow conversion are attractive.
• The company has engaged experienced casino development and operations professionals.
• The transaction is seen as a natural adjacency to Accel's existing route-based gaming business.

Negatives

• The company will need to invest $85-95 million in casino development and track improvements.
• The success of the project depends on the company's ability to execute its development plans and operate the new businesses effectively.
• The company is entering a new market segment with different operational requirements.

Risks

• The company's ability to integrate Fairmount's operations successfully is a risk.
• Completing the casino development on time and within budget is a risk.
• Operating the racetrack and casino businesses successfully is a risk.
• The company's ability to expand into new jurisdictions is a risk.
• The company's dependence on key manufacturers and third parties is a risk.
• Unfavorable macroeconomic conditions could negatively impact the business.
• The company's ability to win, maintain and renew contracts with location partners is a risk.

Future Outlook

Accel anticipates significant growth and cash flow generation from the Fairmount acquisition, with a focus on developing the casino and improving the racetrack experience. The company expects to open the Phase I casino in Q2 2025 and projects substantial Adjusted EBITDA and free cash flow within five years.

Management Comments

• Andy Rubenstein, Accel co-founder, President, CEO and Director, stated that they are excited to close the acquisition and eager to refresh and revitalize an iconic racing and gaming asset.
• Mark Phelan, Accel's President of U.S. Gaming, mentioned that the team has been hard at work, hiring a Casino General Manager, receiving approvals, and finalizing design plans for the first phase of the casino.

Industry Context

This acquisition represents a strategic move by Accel to expand beyond its route-based gaming model into the local gaming market, which is seen as a less competitive and more convenient segment. This aligns with a broader trend of gaming companies seeking to diversify their revenue streams and capitalize on regional opportunities.

Comparison to Industry Standards

• The acquisition of a racetrack and casino by a route-based gaming operator is a unique move, as most large gaming companies focus on larger, destination casinos.
• Companies like Penn National Gaming and Boyd Gaming have a mix of regional casinos and racetracks, but Accel's approach is more focused on convenience and local markets.
• The projected EBITDA and free cash flow conversion are in line with industry standards for well-managed gaming assets.
• The $85-95 million investment is relatively modest compared to larger casino developments, reflecting Accel's capital-efficient approach.

Stakeholder Impact

• Shareholders will benefit from the potential for increased revenue and profitability.
• Employees will have new opportunities in the expanded operations.
• Customers will have access to new gaming and entertainment options.
• The local community will benefit from the economic activity generated by the new casino and racetrack.

Next Steps

• Accel will proceed with the development of the Phase I and Phase II casino facilities.
• The company will continue to improve the horse racing experience.
• The Phase I casino is expected to open in Q2 2025.

Key Dates

Keywords

gaming, acquisition, casino, sportsbook, racetrack, local gaming, FanDuel, horse racing, EBITDA, free cash flow