Bally’s (NYSE: BALY) announced that it is divesting its Asian interactive gaming business to a consortium of executives from the entity being sold. Although the financial specifics of the deal were not disclosed, Bally’s indicated that the transaction will be neutral to its earnings before interest, taxes, depreciation, and amortization (EBITDA). The company made this disclosure in a Form 8-K filing with the Securities and Exchange Commission (SEC).
“The financial impact of the transaction is not expected to be material to Adjusted EBITDA or free cash flow of the Company,” Bally’s stated in the regulatory document. “Going forward, the financial statements of the Company will only reflect licensing and royalty revenues received from the Buyer, which are expected to be lower than revenues under the current accounting treatment, but the profitability margins associated with those licensing revenues are expected to be higher as is customary in the gaming industry for IP license business models. The expected modest decline in Adjusted EBITDA and free cash flow resulting from the transaction are expected to be mitigated by cost actions to simplify Bally’s organizational structure and other cost reductions.”
By divesting its Asian digital operations, Bally’s aims to direct more focus and resources to comparable operations in Europe and North America. Previously, the company had shown optimism about its potential in Asia. However, its online gaming business in the UK has consistently outperformed its Asian and North American segments. After the second-quarter earnings report in August, CEO Robeson Reeves acknowledged operational challenges in Asia but remained hopeful about a turnaround.
“Outside the UK, our business in Asia was challenged in the quarter as we continue to work through several logistical and operational hurdles which directly impacted players,” Reeves said during a conference call with analysts. “We believe the Asian Interactive market remains an attractive opportunity and we will continue to work to manage and grow our position in this important region.”
Bally’s, headquartered in Rhode Island, is scheduled to release its third-quarter results on Wednesday, Nov. 6. At that time, the company might offer further details regarding the sale of its Asian unit. The sale could streamline Bally’s operations as it prepares for significant projects, such as the construction of its permanent casino hotel in Chicago and a new integrated resort on the former site of the Tropicana on the Las Vegas Strip. Additionally, Standard General, Bally’s largest shareholder and a hedge fund, is in the process of acquiring the casino operator, making this an opportune moment to dispose of underperforming assets.
