Brightstar Agrees to Acquire PlayAGS for $1.1 Billion
Shares of the company behind slot machines, PlayAGS, jumped 26.56% on Thursday with trade 35 times higher than usual. This came after PlayAGS announced it's being acquired by private equity firm Brightstar Capital Partners for $1.1 billion.
Brightstar will pay $12.50 per share – a 41% rise compared to the company's average share price from the past 90 days and 40% more than its value on May 8. PlayAGS closed at $11.34 on the day. The company's board of directors endorsed the deal and recommended it to its shareholders who will receive $12.50 per share in cash.
The deal is expected to finish in the second half of the year.
Brightstar's Surprising Maneuver
It was a shocker for some analysts that PlayAGS would be targeted by Brightstar for a takeover, as there was no anticipation for this in the market. One of those who didn't predict this was Jeffrey Stantial from Stifel, who said PlayAGS's share price had been divorced from its excellent fundamentals. However, after thinking back, he noted that the improvements in the company's operations in the past few years made it an attractive candidate for a private equity firm.
"Although we didn’t see this happening on our 2024 bingo card, with the benefit of hindsight, the operational improvements at PlayAGS have been on track for the last few years, which made it a buyout target for a private equity firm like Brightstar," wrote Stantial to his clients. "Despite these structural improvements, shares continued to trade at a significant discount from peers (4.9x as of yesterday's close versus U.S.-listed peers' 4.8x-9.5x). We attribute this mainly to technical constraints in a risk-averse market."
"Although PlayAGS might get acquired this year, it's not the first time the corporation has been in the spotlight for a buyout," Stantial added. In August 2022, Inspired Entertainment offered $10 a share for PlayAGS, but that deal fell through the following month.
PlayAGS Isn't a Stranger to Private Equity
PlayAGS's new partner is not new to this game. Apollo Global Management purchased American Gaming Systems (AGS) for $215 million in 2013. That company later merged into PlayAGS, making Apollo the biggest investor in the company. In late 2022, Apollo sold off that stake.
Regarding Brightstar, this deal appears to be their debut into the gaming industry. Their current and previous investments list doesn't show any links to the industry. Stifel's Stantial noted the buyer already has funding for the transaction and it's likely to obtain approval from PlayAGS's shareholders but may face some regulatory issues.
"1) Brightstar Capital Partners lacks a gaming license and is new to the industry, and 2) some state gaming boards are backlogged with lengthy wait times for monthly board meetings," stated the analyst.
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Source: www.casino.org
