Casino Operator Enjoy Eyes Asset Sale Following Dreams Merger Collapse
Days after initially denying the rumors, casino operator Enjoy has confirmed that it is interested in selling part of its casino operation. The company sent a statement to Chile’s Commission for the Financial Market (CMF, for its Spanish acronym), in which it confirms that it is working with potential interested parties to sell its assets outright or parts of them through the acquisition of shares.
The decision comes after Enjoy could not merge with Dreams due to accusations that the two operators, along with others, colluded to rig the market. Now, according to a memo Enjoy sent to the CMF, it’s revisiting its “long-term strategic plans” in order to resume profitability.
Rumors had surfaced less than two weeks ago that Enjoy was considering the sale of at least one of its properties. However, the company immediately rejected the news, although has retracted that rejection.
All Options on the Table
The previous rumors focused on the possible sale of the casino that the company has been operating in Punta del Este in Uruguay since 2013. However, the new mandate appears to be broader. Enjoy will consider a merger or sale for all of its assets, or a particular property.
The largest shareholders of Enjoy (Euroamerica with 15.25% and Penta with 11.26%), have contracted with financial consultancy Asset Chile to manage the search. Asset has reportedly contacted local and foreign investment funds, but mainly international casino operators.
After the failed merger with Dreams, due to the delay of the monopoly authority and a possible investigation for collusion between casino executives, it was estimated that the company was going to try to recover at least part of what was invested in the Punta del Este property in 2013. That year, it bought 45% of the property for $139 million and, in 2017, bought the rest for $189 million.
This amounts to $328 million, without counting the additional investments and the debts acquired for the operation of the casino. The impact that the eventual sale will have remains unknown, since the Enjoy hotel and casino (formerly Conrad) is one of the main engines of the tourism economy in Punta del Este.
Eliseo Gracia Martínez, Enjoy’s CEO, stated that the company is considering all “possible alternatives for a strategic transaction,” according to the CMF memo. He added that Asset Chile will explore the existence of possible interest from potential investors” who might want to back the company in return for shares or in exchange for one or more of its assets.
Difficult Road Ahead
The deal includes the rights to operator properties in nine jurisdictions in Chile. However, despite the potential value, finding an outright buyer won’t be an easy task.
It’s difficult for international gaming operators to enter new geographies for various reasons, including compliance issues and financial requirements. Neither the Chilean nor the Uruguayan market is strong enough for major operators in the US that are accustomed to returns of 10-12%.
For March of this year, Enjoy’s return on equity (ROE), according to data from its financial statements, was around -5.62%. A year earlier, it was 2.74%.
Therefore, for the first quarter, according to the company’s information, EBITDA (earnings before interest, taxes, depreciation and amortization) reached CLP10.5 billion (US$12.3 million). This is significantly lower than the CLP18.48 billion (US$21.65 million) recorded for the same period last year.
The latest figures are the result of lower revenues in the Punta del Este business unit, explained Enjoy. Currency fluctuations and greater personnel expenses resulting from those fluctuations and inflation attributed to unexpected additional losses of approximately CLP3.112 billion (US$3.64 million).
For the first quarter of the year, the company reported losses of CLP7.58 billion (US$8.88 million). This offset the profit of CLP5.64 billion (US$6.61 million) recorded in the first quarter of last year.
However, Chile’s gaming industry is rebounding. The country recently reported a rise in visitation and gambling spend, which may help Enjoy find investors.
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