Century Casinos announced it has entered into a definitive agreement to acquire Nugget Casino Resort in Sparks, near Reno in Nevada, from Marnell Gaming for a total of $195 million. This will become its tenth casino in North America.
The Colorado-based operator will purchase a 50% interest in Smooth Bourbon for $95 million, which represents a capitalization rate of 7.9% based on preliminary 2021 numbers. Smooth owns the land and building underlying the Nugget, and will enter into a lease of the property to Nugget Sparks (doing business as Nugget Casino Resort) for an annual rent of $15 million. The company will also have a five-year option to purchase the remaining 50% of Smooth for $105 million, plus 2% per annum.
Following required approvals from the Nevada Gaming Commission, the company will purchase 100% of Nugget Sparks for $100 million, which represents and implied earnings before interests, taxes, depreciation and amortization, as adjusted EBITDA before pro forma rent expense.
The acquisition of the Nugget is expected to “meaningfully enhance the company’s free cash flow as well as be immediately accretive to earnings”, the company stated in an official press release.
Upon closing of the Nugget 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 Smooth transaction and the financing are expected to close early in the second quarter of 2022, while the Nugget Sparks acquisition is foreseen to close within one year after the other transaction, subject to required approvals by the Nevada Gaming Commission.
Erwin Haitzmann and Peter Hoetzinger, Co-Chief Executive Officers of Century Casinos spoke about these acquisitions in a press release and said:
“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. 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”.
Located in Sparks, Nevada, Nugget Casino Resort is a full-service resort that 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.
Related to 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. The company anticipates net leverage of the Nugget acquisition on a pro forma basis to be approximately 3.0x.
The news of these acquisitions comes at the heels of Century Casinos’s subsidiary Century Resorts Alberta entering into a definitive agreement to sell land and building in Calgary to Rowanwood Financial Properties, in a deal valued at CAD 8.1 million ($6.5 million).
Century Resorts Alberta sold the casino operations of Century Casino Calgary in December 2020, and leased the portion of the property containing the casino premises to the purchaser. Calgary accounted for 7% of Century Casinos’ net operating revenue in 2020, prior to the sale.