Bet On It: Churchill Downs to buy Exacta for $250M

Penn receives temporary Massachusetts license ahead of Barstool review, NFL week 15 data and other notable stories in the sports betting and iGaming space.

Welcome to the latest edition of "Bet On It," where The Fly looks at news and activity in the sports betting and iGaming space.

SECTOR NEWS: Casino Metro announced the opening of its sportsbook with Caesars Sportsbook (CZR). The partnership brings Caesars Sportsbook’s elevated retail sports betting product to Casino Metro’s guests with plans to launch the Caesars Sportsbook mobile app in Puerto Rico in 2023, subject to regulatory approvals.

Genius Sports (GENI) announced that it has been granted a Sports Gaming Supplier License by the state of Ohio, Casino Control Commission. With the addition of Ohio, Genius Sports now holds 39 licenses, or equivalent, in North America across US states, territories, tribes, and Canada, providing its award-winning products and services to a wide array of clients operating within these jurisdictions. "We are honored that the state of Ohio has awarded Genius Sports its sports gaming supplier license to provide licensed sportsbooks across the Buckeye State with access to our groundbreaking NFL products and marketing services" said Mark Locke, CEO of Genius Sports. "As a growing majority of U.S. states legalize sports betting, Genius Sports welcomes the opportunity to work with states like Ohio, on providing sports fans with official sports data-driven solutions to power their sportsbooks." Legal sports betting will be available in Ohio beginning on January 1.

Churchill Downs (CHDN) announced that it has entered into a definitive agreement under which CDI would acquire all of the outstanding equity interests of Exacta Systems for total consideration of $250M in cash, subject to certain working capital and other purchase price adjustments. The transaction will provide CDI the opportunity to realize synergies related to the company’s recent acquisition of Colonial Downs Racetrack and the Rosie’s Gaming Emporium HRM facilities in Virginia. For tax purposes, the acquisition will be treated as an asset purchase allowing CDI to realize incremental tax benefits, which will provide additional cash flow and will enhance the overall economics of the transaction. The transaction will be funded with cash on hand and through the company’s existing credit facility. The transaction is dependent on various and customary closing conditions, including obtaining required regulatory approvals. The transaction is expected to close in 2023.

MGM Resorts (MGM) announced that MGM Grand Paradise the concession holder of MGM China Holdings, which is 56% owned by MGM Resorts International, has been awarded a new 10-year gaming concession contract. As part of the agreement, MGM China will invest approximately $2B over the next ten years, approximately 50% of which is expected to be treated as capital expenditures and 50% as operating expense1. Approximately 90% of this spend will be earmarked for the development of international tourist markets and non-gaming projects and programming to drive diversification to the region. MGM China will also receive an additional 200 table games raising its total table count to 750, which will support future market share growth opportunity for our business.

Melco Resorts & Entertainment (MLCO) announced further details of the ten-year concession to operate games of fortune and chance in casinos in Macau granted to Melco Resorts, a subsidiary of the company, as announced on December 16. The concession is granted by the Macau Special Administrative Region of the People’s Republic of China to Melco Resorts Macau as the concessionaire. The term of the concession commences on January 1, 2023 and ends on December 31, 2032. Under the concession, Melco Resorts Macau is authorized to operate the Altira Casino, the City of Dreams Casino and the Studio City Casino as well as the Grand Dragon Casino and the Mocha Clubs. The Macau SAR government has allocated 750 gaming tables and 2,100 electronic gaming machines for operation by the concessionaire during the concession. Under the concession, Melco Resorts Macau will pay an annual premium to the Macau SAR of MOP30,000,000 — equivalent to approximately US$3,741,000 — plus a variable amount calculated in accordance with the number of gaming tables and electronic gaming machines operated by Melco Resorts Macau. The concession may be terminated by the Macau SAR government by mutual agreement with the Concessionaire, for breach of obligations by the concessionaire, for reasons of public interest, by reason of threat to national security, or for lack of suitability of the concessionaire. In addition, the Macau SAR government may, from the eighth year of the concession, redeem the concession by notice to the concessionaire at least one year in advance. Pursuant to such redemption, the Macau SAR government would assume all rights and obligations of the concessionaire resulting from business legally and validly conducted by the concessionaire before the date of the redemption notice and the concessionaire would have a right to obtain reasonable and fair compensation under applicable Macau SAR law. The concession provides for Melco Resorts Macau’s right to use the casino premises and related land for the purpose of operating games of chance under the concession during the term of the concession. On the termination or expiry of the concession, the casino premises operated under the concession and the gaming equipment would automatically revert to the Macau SAR without compensation.

FOOTBALL AND FUTBOL: According to Canaccord analyst Michael Graham, the National Football league, or NFL, is a driver of results for sports betting operators due to the level of wagering volumes on football relative to other sports, and Weeks 4-16 of the NFL season are taking place during Q4. Graham noted that Week 15 was another solid week for sportsbooks, with seven of the eight largest underdogs covering the spread. He believes operators also probably benefited from increased NFL handle because of the six standalone games last week following the return of Saturday football, Also nine of the sixteen games went under the projected total, dropping the unders percentage to 55%. The World Cup Final, on the other hand, was an unfavorable outcome for sportsbooks, Graham contended, with BetMGM reporting that Argentina was its top liability to win the tournament at 29% of total handle. New York reported a record $44.5M of gross gaming revenue, or GGR, generated from $343M of wagers placed during NFL Week 14, enabling the state surpass $15B of handle since launching in January. The industry-wide hold rate of 13% was the highest since week five and the third- best of the season for operators, with the hold rate coming in above the historical average of 7% for the tenth consecutive week and thirteenth time overall. FanDuel’s (PDYPY) share of handle was at 41%, although its share of GGR dropped to 47%. DraftKings’ (DKNG) share of handle was 32%, although its share of GGR ticked up to 30% due to a 12% hold rate.

GARDEN STATE DATA: On December 16, the New Jersey Division of Gaming Enforcement reported total gaming revenue reported by casinos, racetracks, and their partners was $441.1M for November, reflecting a 0.3% increase from $439.6M reported in November 2021. For year-to-date, total gaming revenue reported by casinos, racetracks, and their partners was $4.76B reflecting a 9.8% increase from $4.33B reported in the prior period. Casino Win for the nine casino hotel properties was $214.6M for November, reflecting a 3.7% increase compared to $206.9M for November 2021. Year-to-date casino win for the nine casino hotel properties was $2.57B, reflecting growth of 9.7% compared to $2.34B for the prior period. For the month of November, internet gaming win reported by casinos and their partners was $146.2M, reflecting growth of 23.9% compared to $118M for the prior period. For the year-to-date period, internet gaming win reported by casinos and their partners was $1.51B, reflecting growth of 22.5% compared to $1.23B for the prior year-to-date period. Sports wagering gross revenue reported by casinos, racetracks, and their partners was $80.4M for November, reflecting a 29.9% decrease when compared to $114.8M in the prior period. Sports wagering gross revenue reported by casinos, racetracks, and their partners was $675.3M for the year-to-date, reflecting a 10.8% decline when compared to $756.7M for the prior period. According to Benchmark analyst Mike Hickey told investors in a research note that football continues to lead the table for wagers by sports but is seeing its lead decline as its market share by sport dropped 7% to 32%, just 4% above basketball wagers. Basketball follows football in handle by sport, taking up 28% of market share, an increase from just 13% of wagers last month. Baseball continues its decline as November marks the first month since March the MLB has had no slated games. Baseball wagers only accounted for 2% of total for November, down 7% from October. The remaining 38% of market share is split up between parlays, which account for 23% of total wagers, and all other sports, accounting for the remaining 16% of wagers in November. Of the $80.4M in total November sportsbook revenue, $77.4M of the total GGR was generated from OSB operators and $3.1M was generated through retail bettors. November OSB was up +6% sequentially but has fallen -28% from November 2021. T

The online sports betting market share leaders are as follows:

1. New Meadowlands (FanDuel, Pointsbet, NJSuperbook) $44.4M in GGR, up +4%
2. Resorts Digital Gaming (DraftKings, BetStarNJ, ResortsCasino) $16.6M in GGR, down -3%
3. Borgata Hotel Casino & Spa (BetMGM, Borgata Sports) $8.7M in GGR, up +2%
4. FR Park Racing, LP (Barstool, PlayUp) $2.5M in GGR after its debut

BARSTOOL REVIEW LOOMS FOR PENN: Penn Entertainment’s (PENN) Plainridge Park Casino received a temporary retail Massachusetts sports betting license, allowing regulators to open an investigation into Barstool Sports, Sam McQuillan of Legal Sports Report wrote. The Massachusetts Gaming Commission unanimously voted to approve the temporary sports betting license on Tuesday. This enables the Massachusetts Gaming Committee’s Investigation and Enforcement Bureau to launch a “suitability review” into Barstool Sports, which Penn will fully own by February. “What I am struggling with is marrying that brand with PPC’s sportsbook, which you have elected to brand Barstool, which you elected to do because it gave you the market share and everything else that came with Barstool Sports,” Commissioner Eileen O’Brien said.. “You want this, we’re fine with this. Let’s come with language that we can all move forward with,” Penn CEO Jay Snowden said. “As long as we get our temporary licenses, we can move forward with January and March launches.”

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally’s (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI) and Wynn Resorts (WYNN).

Keywords: casino, Puerto Rico, Ohio, Virginia, Macau, New Jersey, GGR, Barstool, gaming concession, NFL, unders, sportsbooks, license