COLORADO SPRINGS, CO – February 23, 2022 – Century Casinos, Inc. (Nasdaq Capital Market®: CNTY) (“Century Casinos” or the “Company”), announced that it entered into a definitive agreement to acquire 50% of Smooth Bourbon, LLC (“PropCo”) and 100% of Nugget Sparks, LLC (“OpCo”) dba Nugget Casino Resort (“Nugget”) from Marnell Gaming, LLC for $195 million. The Company will also have a five-year option to purchase the remaining 50% of PropCo for $105 million plus 2% per annum.
The Company will purchase its 50% interest in PropCo for $95 million, which represents a capitalization rate of 7.9% based on preliminary 2021 numbers. PropCo owns the land and building underlying the Nugget and will enter into a lease of the property to OpCo for an annual rent of $15 million. Following required approvals from the Nevada Gaming Commission, the Company will purchase 100% of OpCo for $100 million, which represents an implied earnings before interest, taxes, depreciation and amortization, as adjusted (“Adjusted EBITDA”)* before pro forma rent expense, multiple of 5.6x based on preliminary 2021 numbers. The estimated multiple excludes any potential cost synergies and operational improvements. The acquisition of OpCo is expected to meaningfully enhance the Company’s free cash flow as well as be immediately accretive to earnings.
In connection with the acquisition, Goldman Sachs Bank USA has provided a commitment letter for $350 million in senior secured term loan financing to support the acquisition, refinance Century Casinos’ existing debt and for general corporate purposes and a $30 million senior secured revolving credit facility. On a pro forma basis upon acquisition of OpCo, the Company anticipates net leverage to be approximately 3.0x.
“We have been looking at entering the Reno market for a long time, and we believe the Nugget is a perfect fit for our portfolio. We look forward to welcoming the great team at the Nugget to Century Casinos,” Erwin Haitzmann and Peter Hoetzinger, Co-Chief Executive Officers of Century Casinos remarked. “We believe there is a lot of upside to this transaction and that we identified some areas of improvement to continue the Nugget’s growth. We expect the Nugget to seamlessly integrate and provide added synergies for Century Casinos’ US portfolio,” they concluded.
Nugget Casino Resort is located in Sparks, Nevada, conveniently located on Interstate 80 with easy access from Reno-Tahoe International Airport (approximately three miles). The full-service resort includes a large gaming floor, two hotel towers, 110,000 square feet of convention space, a 8,555 seat outdoor amphitheater, a wide variety of casual and fine dining options in addition to several on-site bars and lounges, and a 5-story 1,200 space parking garage and additional 1,272 parking spaces. The property consists of 50,200 square feet of casino space, 859 slot machines, 29 table games, 1,382 hotel rooms and seven dining venues. The Nugget Casino Resort had net operating revenue of $100.4 million and Adjusted EBITDA* of $32.8 million based on preliminary results for the year ended December 31, 2021.
The Reno–Sparks area is famous for its casinos but is also known as a destination for outdoor recreation with proximity to Lake Tahoe and several ski resorts. It has attracted leading technology and manufacturing companies including Google, Tesla, Switch, Amazon and Apple. The economy is diversifying into a broader base that spans healthcare, entrepreneurial startups and technology-based industries, and the area currently has an unemployment rate below 3%.
Upon closing of the OpCo acquisition, the Company’s North American portfolio will increase to 10 casinos that include 6,700 gaming machines and 140 table games. On a pro-forma basis, the Company expects to generate 94% of its Adjusted EBITDA* from its North American casinos.
The PropCo transaction and the financing are expected to close early in the second quarter of 2022. The OpCo acquisition is expected to close within one year after the PropCo transaction, subject to required approvals of the Nevada Gaming Commission. Closing of both transactions is subject to customary closing conditions.
Goldman Sachs & Co. LLC served as sole financial advisor to Century Casinos in connection with the acquisition.
