Gateway to gain NYSE public listing via USD 1.1B merger with Leisure, gets new CEO

Gateway Casinos & Entertainment Ltd. has agreed to a deal that will create a new firm valued at about USD 1.12 billion including debt.

Gateway said last Friday that Leisure Acquisition Corp., a special purpose company created to make acquisitions, will merge into a new unit of GTWY Holdings, Gateway’s parent. GTWY shares are expected to be listed on the New York Stock Exchange, according to a statement.

Following the transaction, Marc J. Falcone, a Leisure director and a former banker at Goldman Sachs Group Inc. and Deutsche Bank Securities Inc., will become President and CEO, replacing Gateway CEO Tony Santo, who will retire, according to the statement. Santo will continue as an advisor to the Board of Directors, and Falcone for three months following his retirement in order to assist with an orderly transition.

Upon closing of the transaction, A. Lorne Weil and Daniel B. Silvers, Leisure's Executive Chairman, Chief Executive Officer, respectively, are expected to join Gateway's Board of Directors. Lyle Hall, Olga Ilich and Michael Percy also are expected to join. Additional independent directors are expected to be appointed at or following the completion of the transaction such that Gateway Board of Directors may be comprised of up to 9 members.

Gabriel de Alba, Managing Director and Partner of Catalyst and Executive Chairman of Gateway, stated: “With its strong corporate and property operating teams, diversified growth initiatives, and industry-leading operating model, Gateway has built tremendous momentum and established a solid foundation for ongoing growth. We are proud of the team and their many accomplishments over the last six years which include doubling our locations and adjusted EBITDA, increasing our slot machines by nearly three-times, increasing our table games by over two-times and adding 56 new F&B outlets across British Columbia and Ontario. The disciplined execution of our near- and long-term strategies has created significant value and returns over the years for all of the Company’s shareholders. We are thankful to Tony for his leadership of Gateway and his key role going forward.”

“I am excited to enter this new role as CEO of Gateway,” Falcone commented. “I am grateful for the confidence placed in me by Gabriel, HG Vora and the leadership of Leisure. I believe the Canadian gaming market offers unparalleled growth opportunities and Gateway has always been a platform that I found to be highly-compelling. I look forward to creating significant shareholder value alongside the rest of the Gateway management team.”

This is the latest in a string of mergers in the fast-growing gaming industry aided by special purpose acquisition companies, or spacs, that let private companies raise money without an initial public offering. Earlier this month, sports-betting firm DraftKings Inc. agreed to be bought by a publicly traded acquisition fund that valued the new firm at about USD 3.3 billion.

Gateway, backed by private equity firm Catalyst Capital Group, has long sought to sell its shares. The Burnaby, a British Columbia-based gaming company, filed for a U.S. initial public offering in November 2018, expecting to raise about $400 million and valuing the company at as much as C$2.5 billion, Bloomberg reported. Gateway withdrew its IPO registration on Friday.

Gateway said the transaction with Leisure will be anchored by a $30 million private placement by gaming investor HG Vora Capital Management LLC, which has agreed to purchase 3 million shares of GTWY for $10 each, according to the statement.

The deal is expected to close in the second quarter, Gateway said. Gateway and Leisure will host an investor call to discuss the transaction on Jan. 7, according to the statement.

Gateway has 25 properties in British Columbia and Ontario, including the Starlight Casino near Vancouver, and the Grand Villa Casino in Burnaby, where the company is headquartered. Incoming CEO Falcone served as Executive Vice President, Chief Financial Officer and Treasurer of Red Rock Resorts from October 2015 until May 2017 and as Executive Vice President and Chief Financial Officer of Station Casinos LLC from June 2011 until May 2017. Previously, he was Treasurer of Station Casinos LLC since January 2013 until May 2017, and he also served as Chief Financial Officer of Fertitta Entertainment LLC from October 2010 through May 2016.