Updated March 6, 2023 - 1:55 pm
Las Vegas-based Golden Entertainment, owner of PT’s Taverns chain and The Strat, is selling its distributed gaming operation to an Illinois company, the firms announced Monday.
Golden will get $322.5 million, plus $39 million of estimated purchased cash, from J&J Ventures Gaming of Effingham, Illinois, for its slot machine routes in Nevada and Montana. The deal is expected to close by the end of the year pending regulatory approvals.
Distributed gaming involves slot machine routes on which workers install, maintain and operate slot machines at bars, taverns, restaurants, grocery stores and convenience stores.
J&J Gaming is paying $213.5 million plus an estimated $34 million of purchased cash for the Nevada route and $109 million plus an estimated $5 million of purchased cash for the Montana route. The purchased cash is the amount inside the machines on the route.
Golden also announced a five-year agreement with J&J to support the gaming operations of Golden’s branded tavern locations in Nevada.
J&J Ventures Inc., the predecessor company, began route operations in 1929. Today, J&J Gaming is one of the largest terminal operators in Illinois and Pennsylvania. J&J Amusements is a leading operator of nongaming devices like dart machines, pool tables, jukeboxes, ATMs and other amusement devices.
Golden Chairman and CEO Blake Sartini said his company has built the distributed gaming model in Nevada and Montana over the past 20 years.
“We believe this transaction will provide further success for our route partners through sharing of best practices and new technology,” Sartini said in a news release.
He said the transaction will enable Golden to focus on its wholly-owned casinos and taverns. In addition to The Strat, Golden operates Arizona Charlie’s and several casinos in Laughlin and Pahrump.
“We anticipate our Distributed Gaming team members will continue to serve our route partners with the same dedication under J&J Gaming’s ownership,” he said. “Our confidence in J&J Gaming’s future success is highlighted by our new long-term agreement with J&J Gaming to service Golden’s wholly owned tavern portfolio. For Golden, these transactions will allow us to focus our management team and capital on our portfolio of wholly owned casinos and taverns in Nevada and create additional value for our shareholders.”
Analysts reviewing the deal said they expect it to be beneficial to investors because of Golden’s new focus on the casino and tavern businesses. The company also recently announced the sale of its Rocky Gap casino in Maryland and that combined with the sale of the slot routes should improve profit margins.
“The sale further simplifies Golden’s business. … and should remove a drag on GDEN (Golden) valuation as investors have largely ascribed a mid-single-digit multiple to the distributed gaming business,” gaming industry analyst Omer Sander of J.P. Morgan said in a Monday report to investors.
Las Vegas-based John DeCree of CBRE Equity Research said that Golden will continue to profit from its tavern business.
“As part of the sale, GDEN entered into a typical five-year contract with J&J to service its wholly-owned tavern locations in Nevada at similar economic terms as current,” DeCree said in a Monday note to investors. “This means the tavern portfolio should continue to generate similar levels of cash flow as 2022 ($38 million) and potentially grow from there based on the unit expansion plan outlined on the most recent earnings call last week.”