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Wednesday, May 25, 2022

Bally’s Places $100M Bet on Allied Esports

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The high stakes jockeying for the future of Allied Esports Entertainment Inc. in Irvine has begun.

The company (Nasdaq: AESE), which operates venues and live events for video gaming enthusiasts, is evaluating a takeover offer for the company—but one that comes with strings attached.


Allied Esports said it had received the unsolicited offer from casino giant Bally’s Corp. (NYSE: BALY) of Rhode Island to acquire all the outstanding equity interests of the company for $100 million.

 
Allied Esports dropped to $2.23 per share early last week after the bid was disclosed, for a market cap of about $90 million. Bally’s market cap is nearly $2 billion.


The Bally’s proposal would require Allied Esports to terminate its previously announced agreement to sell its World Poker Tour unit to Element Partners LLC for $78.3 million, according to a statement from Allied Esports on March 5.

 
“The company’s board of directors, consistent with its duties and the company’s obligations under its existing agreement with Element, will evaluate Bally’s proposal in due course.

 
The company and Element continue to discuss potential updates to the current terms of their agreement,” Allied Esports said.

‘No Assurance’

“There can be no assurance that the company will enter into a definitive agreement with Bally’s or consummate any transaction with Bally’s,” said Allied Esports, which went public via a reverse merger with a SPAC less than two years ago.


Meanwhile, Allied Esports and Element continue to discuss potential updates to the current terms of their agreement.


“At this time, the company’s board of directors continues to recommend to the company’s stockholders the approval of the transaction with Element,” according to Allied Esports. The deal with Element was announced Jan. 19.


“If approved by the company’s stockholders, and subject to satisfaction of other closing conditions, the transaction with Element would be expected to close on or about March 30, 2021,” Allied Esports said.


The World Poker Tour’s television show is seen worldwide by more than 150 million people annually, and its global events have awarded more than $1 billion in prize money over the years.


“Due to COVID-19’s impact on the company’s overall revenue generation and profitability timeline, we believe the forthcoming sale of the WPT business will garner significant capital and an avenue to determine new opportunities that will deliver accelerated returns for our stakeholders,” Frank Ng, chief executive of Allied Esports Entertainment, said back in January.

‘Real Money’

Allied Esports also said in a statement two months ago that an additional sale of its well-known esports business was being considered, although “no potential or particular buyer has been identified and there are no initial or ongoing negotiations in respect of the sale of the esports business.”


If there is a sale of the esports business after the WPT deal, the company said then “we would proceed, under a new corporate name, as a publicly traded holding company focused on using our cash resources to explore opportunities in online entertainment, including but not limited to, real money gaming and other gaming sectors.”


Real money gaming refers to quasi-gambling online sites where real money is wagered.


“The company does not have any specific merger, asset acquisition, reorganization or other business combination under consideration or contemplation,” Allied Esports said in January, adding it will continue to be a public company.

 
The Bally’s Corp. offer disclosed this month may have added to the complexities.


Online video games and esports have gained popularity during the pandemic as people are stuck at home. For example, shares in Irvine-based Blizzard Entertainment’s parent company Activision Blizzard Inc. (Nasdaq: ATVI) have risen about 55% since the start of the pandemic.


Allied Esports had revenue of $5.9 million in the three-month period ending Sept. 30, down 2.5% from the same quarter a year earlier.
 

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Kevin Costelloe
Kevin Costelloe
Tech reporter at Orange County Business Journal

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