8-K: Light & Wonder to Acquire Grover Gaming's Charitable Gaming Assets for $850 Million Plus Earn-Out

Light & Wonder is set to acquire Grover Gaming's charitable gaming assets for $850 million in cash plus a potential $200 million earn-out, expanding its presence in the fast-growing charitable gaming sector.

Summary

• Light & Wonder (L&W) has entered into an agreement to acquire Grover Gaming's charitable gaming assets for $850 million in cash, subject to adjustments, and a potential $200 million earn-out based on revenue over four years.
• The upfront consideration represents approximately 7.7x Grover's 2024 Adjusted EBITDA and 7.1x its Run Rate Adjusted EBITDA.
• Grover Charitable Gaming has over 10,000 leased electronic pull-tab units across five U.S. states (North Dakota, Ohio, Virginia, Kentucky, and New Hampshire) operating under a recurring revenue model.
• The transaction is expected to close in the second quarter of 2025, pending regulatory approvals and customary closing conditions.
• Light & Wonder expects the acquisition to be accretive to value and earnings, with high-single-digit Adjusted NPATA per share accretion in the first full calendar year post-acquisition.
• The acquisition will be funded through existing cash and incremental debt financing, with L&W expecting its net debt leverage ratio to remain within its target range of 2.5x-3.5x.
• Light & Wonder reaffirms its 2025 $1.4 billion Consolidated AEBITDA Target, excluding any contribution from the Grover Charitable Gaming acquisition.

Sentiment

Score: 8

Explanation: The document presents a positive outlook on the acquisition, highlighting its strategic and financial benefits. The language used is optimistic, emphasizing growth, accretion, and strong customer relationships.

Positives

• The acquisition provides Light & Wonder with a leading position in the fast-growing charitable gaming space.
• Grover has a loyal customer base supported by strong relationships and local teams.
• The transaction is expected to be highly accretive to Light & Wonder's value and earnings.
• The acquisition complements Light & Wonder's cross-platform strategy by expanding into a new regulated adjacency.
• Grover's business model is highly cash-generative with strong underlying growth.

Risks

• The closing of the transaction is subject to regulatory and gaming approvals, which may not be obtained.
• A material adverse change, event, or occurrence could affect Light & Wonder or Grover Charitable Gaming prior to closing, potentially delaying or causing abandonment of the transaction.
• The transaction may involve unexpected costs, liabilities, or delays.
• Disruptions from the transaction could harm relationships with customers, employees, and suppliers.
• Light & Wonder may be unable to achieve the expected financial, operational, and strategic benefits of the transaction or successfully integrate Grover Charitable Gaming.

Future Outlook

Light & Wonder expects the transaction to be accretive to value and earnings, with high-single-digit Adjusted NPATA per share accretion in the first full calendar year post-acquisition. The company reaffirms its 2025 $1.4 billion Consolidated AEBITDA Target, excluding any contribution from the Grover Charitable Gaming acquisition.

Management Comments

• Matt Wilson, President and Chief Executive Officer of Light & Wonder, stated that the transaction complements their position as the leading cross-platform global games company and adds a compelling regulated adjacency to their profile.
• Garrett Blackwelder, CEO and Founder of Grover Gaming, expressed gratitude to Grover Gaming teammates and customers, stating that Light & Wonder is an ideal partner given similar company cultures and dedication to innovation and customer service.

Industry Context

The acquisition reflects a trend of consolidation and expansion in the gaming industry, with companies seeking to diversify their offerings and capitalize on high-growth segments like charitable gaming. Light & Wonder's move aligns with its strategy to become a leading cross-platform global games company.

Comparison to Industry Standards

• The acquisition multiple of 7.7x 2024 Adjusted EBITDA is within the typical range for gaming industry transactions, but the specific value depends on the growth prospects and synergies.
• Companies like Aristocrat Leisure and IGT have also been active in acquiring gaming technology and content providers to expand their market presence.
• The focus on recurring revenue models, as seen with Grover's leased E-Pull tab units, is a common strategy in the gaming industry to ensure stable and predictable cash flows.

Stakeholder Impact

• Shareholders: Expected to benefit from increased value and earnings accretion.
• Employees: Key members of Grover's team have signed employment offer letters with L&W.
• Customers: Expected to benefit from enhanced content and technology offerings.
• Charities: Continued fundraising tool with less time and manpower required vs. traditional fundraising.

Next Steps

• Obtain required regulatory and gaming approvals.
• Satisfy customary closing conditions.
• Close the transaction, expected in Q2 2025.
• Integrate Grover Charitable Gaming into Light & Wonder's operations.
• Leverage Light & Wonder's content and technology to enhance Grover's offerings.
• Continue to partner with Grover Gaming's customers and build on its dedication to customer service.

Key Dates

Keywords

acquisition, Grover Gaming, Light & Wonder, charitable gaming, electronic pull-tabs, EBITDA, NPATA, gaming, consolidation