CHICAGO - Accel Entertainment, Inc. (NYSE: NYSE:ACEL), a prominent distributed gaming operator in the United States, has announced an agreement to acquire Fairmount Holdings, Inc., which includes the only active horse racing venue in the greater St. Louis area, and its subsidiary Fairmount Park, Inc.
The deal, valued at approximately $35 million, will be paid in 3.45 million shares of Accel's Class A-1 common stock.
The acquisition positions Accel to expand its local gaming footprint by incorporating the Fairmount property, which currently operates 65 race days and approximately 435 horse races annually. The deal also includes an Organization Gaming License, allowing for casino gaming positions, and a partnership with FanDuel for sports wagering in Illinois.
Accel plans to invest an additional $85 to $95 million beyond the purchase price for the development of casino facilities and improvements to the horse racing experience. The company has engaged RRC Gaming Management LLC for the development and operations of the casino, tapping into the expertise of industry veterans like Tony Rodio and Holly Gagnon.
The transaction is expected to close in the fourth quarter of 2024, subject to customary approvals from the Illinois Racing Board and the Illinois Gaming Board. Accel anticipates that the investment will yield an Adjusted EBITDA potential of $20 to $25 million with over 75% free cash flow conversion, signaling a robust return on capital.
Accel's CEO Andy Rubenstein expressed enthusiasm for the venture, emphasizing the company's commitment to maintaining the rich history of Fairmount Park and supporting the Illinois horse racing industry. The acquisition, marking nearly a century of Fairmount Park's operations, aims to bolster job creation and economic development in the southern Illinois and greater St. Louis community.
The sellers, William Stiritz and Robert Vitale, praised the agreement, expressing confidence in Accel's capabilities to realize the full potential of the sportsbook and racetrack. Mayor Jeff Stehman of Collinsville, IL, also welcomed the acquisition, anticipating positive economic impacts for the local community.
This news is based on a press release statement from Accel Entertainment, Inc.
In other recent news, Accel Entertainment has reported steady growth in the first quarter of 2024. The company's Q1 2024 revenue rose to $302 million, marking a 2.9% increase year-over-year (YoY), and adjusted EBITDA saw a marginal increase of 0.3% YoY, reaching $46 million. Despite facing challenges such as unfavorable weather conditions that negatively impacted same-store sales growth, Accel's expansion into Illinois and Nebraska and a robust growth pipeline have contributed to these positive results.
Accel Entertainment also announced a $200 million share repurchase program, which is backed by a strong balance sheet with $286 million in net debt and $553 million in liquidity. The company is actively exploring multiple opportunities for expansion across the country, with expectations to enter multiple markets by the end of the year.
InvestingPro Insights
In light of Accel Entertainment's (NYSE: ACEL) recent move to acquire Fairmount Holdings, Inc., investors may find it beneficial to consider some key financial metrics and insights from InvestingPro. With a market capitalization of $875.15 million, Accel's strategic investment in expanding its gaming footprint shows a commitment to growth in the gaming and entertainment sector. The company's P/E ratio, which stands at 20.35, reflects investor sentiment about its earnings potential, particularly as it embarks on this new venture.
Accel's solid financial position is underscored by a Price / Book multiple of 4.34, indicating that the market values the company's assets favorably compared to its book value. This is particularly relevant as the company takes on a significant investment in developing casino facilities and improving the horse racing experience. Additionally, with a gross profit margin of 30.23% over the last twelve months as of Q1 2024, Accel appears to be effectively managing its costs, which could bode well for the profitability of the newly acquired operations.
InvestingPro Tips highlight that while analysts have revised their earnings expectations downwards for the upcoming period, they predict the company will be profitable this year. Furthermore, Accel's liquid assets exceed its short-term obligations, which may provide financial flexibility for the investments and developments planned. It's noteworthy that Accel does not pay a dividend to shareholders, which could mean that the company is reinvesting its earnings back into growth initiatives like the Fairmount acquisition.
For investors looking to delve deeper into Accel Entertainment's financial health and future prospects, there are additional InvestingPro Tips available. To access these insights and leverage the full suite of analytical tools, visit InvestingPro. Remember to use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. There are more tips waiting to guide your investment decisions.
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