The MBO is being backed by Endeavor CEO Ariel Emanuel and features participation from several OpenBet executives, including CEO Jordan Levin. It will be financed through a mix of cash and debt.
A management buyout is when part or all of a company’s management team acquire various assets and operations from the company’s owner. It is typically carried out as a means to take a company private.
The agreement primarily focuses on OpenBet. Endeavor said it will continue to market IMG Arena for sale to third parties during the sign-to-close period and after closing.
OpenBet works with more than 200 market operators around the world including FanDuel, PointsBet, ESPN Bet, OPAP and Sky Bet. Should the transaction complete as expected, Levin will continue to lead the business as CEO.
“This MBO allows us to continue executing our vision for increased market expansion and product innovation,” Levin said. “Our group is extremely confident in OpenBet’s future considering the premium product offering, superior talent and solid foundation we already have in place following a strong period of business growth.”
The deal remains subject to several customary closing conditions, including approvals from certain gaming regulatory authorities. Oakvale Capital LLP and The Raine Group are acting as financial advisors to Endeavor.
Why is Endeavor selling the assets?
News of the double asset sale first broke in August this year. At the time, Endeavor said it was a necessary step for the closing of its proposed take-private by Silver Lake.
Technology investment company Silver Lake in April agreed to take Endeavor private in a deal worth $13 billion. This will see Silver Lake acquire 100% of the outstanding Endeavor shares it did not already own.
Silver Lake maintains it will be the largest private equity privatisation investment deal in over a decade.
Endeavor acquired OpenBet in September 2022 for $800 million. This was, however, three months later than planned and $400 million less than initially agreed.
The sale formed part of a general streamlining of the Light & Wonder business, formerly known as Scientific Games. It also sold its lottery arm – which retained the Scientific Games name – in October 2021 to private equity group Brookfield Business Partners.
In February of this year Endeavor integrated IMG Arena into the OpenBet business. Not long after, it initiated a strategic review of IMG Arena to maximise its potential. As noted in the announcement, the future of IMG Arena after the MBO completes remains uncertain.
Endeavor sees Q3 net loss widen despite revenue growth
Confirmation of the MBO comes after Endeavor last week published its Q3 financial results. These showed a 66.6% year-on-year increase in revenue to $2.02 billion in the three months to 30 September.
However, a sharp rise in operating expenses offset all revenue growth. After financial costs and tax payment, net loss widened from $117 million to $186.3 million.
However, this only told part of the story. Both OpenBet and IMG Arena were reported as discontinued operations as they were considered ‘head for sale’, which meant Endeavor was seeking a sale within one year.
Net loss from discontinued operations topped $442.4 million, with this only partially offset by $208.2 million in tax benefits.
After excluding $155.7 million in net losses from non-controlling interests, this left a total bottom-line net loss of $264.7 million, compared to $69.2 million last year.
Shuffling the pack at Endeavor
Aside from OpenBet and IMG Arena, Endeavor could also sell several other assets.
Last month, it launched a review and potential sale of certain events within its IMG portfolio. These include the Miami Open and Madrid Open tennis tournaments and art platform Frieze.
Original article: https://igamingbusiness.com/strategy/ma/endeavor-mbo-openbet-img-arena/
