Endeavor to acquire sports betting business unit OpenBet for $800M after L&W drops sale price by 33%

Gambling products and services provider Light & Wonder (formerly known as Scientific Games) has entered into an amended agreement for the sale of its online sports betting technology company OpenBet to Endeavor Group Holdings. The global sports and entertainment company, owner of Ultimate Fighting Championship, is set to acquire OpenBet for $800 million, $400 million down from a previous announcement.

The amended terms of the transaction were unveiled on a Thursday SEC filing. Under the new agreement, Light & Wonder will receive $750 million in cash and $50 million in Class A common stock of Endeavor, based on the average price of such stock in the twenty days before the date of the amendment. 

Endeavor said last September it planned to buy OpenBet for $1.2 billion: the new valuation is 33% less than previously disclosed. The original deal was also set to be $1 billion in cash, and the rest in Endeavor shares.

OpenBet's stand at ICE 2022

While the filing doesn’t explain the reason for the revised price, experts say the realities of the market are now different from nine months ago, especially within the US sports betting segment, amid higher data, rights and customer acquisition costs.

Despite the slashed asking price, Light & Wonder said the amended purchase agreement provides “a strong valuation in the current market” and also “increases the speed and certainty of closing” by modifying the conditions to that end. Under the revised terms, the transaction is anticipated to close by the end of the third quarter of 2022.

A recently completed sale of Light & Wonder’s Lottery business in April -to asset manager Brookfield Business Partners for $6 billion- and the pending sale of OpenBet will cumulatively generate approximately $5.6 billion of estimated net after-tax proceeds, the business updated on Thursday. It is seen as the “final step” to streamline the company’s portfolio in its effort to become "a global cross-platform leader" in the business on gaming.

Barry Cottle, President and CEO of Light & Wonder

“Endeavor is the right partner for OpenBet and the amended agreement increases speed and certainty by creating a simplified path to closing the transaction, while unlocking substantial benefits for OpenBet and Light & Wonder,” said Barry Cottle, President and Chief Executive Officer of Light & Wonder.

According to the executive, OpenBet has demonstrated “continued momentum across their key markets.” The cash consideration from the subsidiary’s sale is expected to enable Light & Wonder to further de-lever its balance sheet and achieve a targeted net debt leverage ratio range of 2.5x to 3.5x.

“This transaction is the final step in our journey to streamline our organization as we deliver on our promises as the leading cross-platform global game company,” noted Cottle. “Our enhanced financial flexibility will enable us to accelerate the return of significant capital to shareholders through our share repurchase program, while also investing in key growth initiatives.”

Endeavor CEO Ariel Emanuel

OpenBet is a leading online sports betting technology company that offers content, tech and services to operators around the world, including the US, UK, Australia and Canada. To date, it has over 75 global customers, including 46 sportsbooks across 12 US states.

Endeavor plans to pair the OpenBet business with its existing sports betting unit, IMG Arena, which provides data and live streaming to hundreds of operators worldwide. Endeavor CFO Jason Lublin said in the original September announcement that OpenBet and IMG Arena would combine in a new line that would start with $340 million in annual revenue.

The combined entity, which would add OpenBet’s trading services and betting engine, would allow Endeavor to compete on better terms with other back-end sports betting services giants. The combination would create a unique end-to-end solution, which Endeavor CEO Ariel Emanuel said would enable the group “to expand our footprint across the entire sports betting value chain and further capitalize on the tremendous upside we see coming” from the industry.