Light & Wonder, Inc. (LNW – Free Report) recently entered into a definitive agreement with Grover Gaming to acquire the latter’s charitable Gaming Assets for $850 million cash and an additional four-year revenue-based earn out of up to $200 million cash. LNW will fund the acquisition with a combination of incremental debt financing and existing cash. The company expects the net debt leverage ratio will remain within the target range of 2.5x to 3.5x, post buyout.
The transaction subject to regulatory approvals and customary closing conditions is expected to be completed by the second quarter of 2025. For 2025, the company reiterated Consolidated AEBITDA target of $1.4 billion backed by solid market traction across its businesses.
Will LNW Stock Benefit From This Acquisition?
Headquartered in Greenville, NC, Grover Charitable Gaming has a strong presence in the fast-growing charitable gaming space. It operates around 10,000 leased electronic pull-tab units across five U.S. States. In fiscal 2024 the company registered revenues of $135 million with adjusted EBITDA of $111 million. The company has formed a strong relationship with charitable gaming clients and established itself as a leading supplier of electronic pull tabs.
Charitable Gaming space is expected to grow at a substantial rate in upcoming years. The acquisition will enable LNW to capitalize on this incremental revenue opportunity. This will allow LNW to expand its market reach by utilizing Grover’s strong customer relationship. Management also believes that the cultural alignment of both companies will streamline the integration process.
Light & Wonder strives to be a leading cross-platform global-games company with a focus on content and digital markets. LNW follows a holistic growth strategy and intends to extend its footprint in high-return markets and strategic adjacencies that generate strong long-term cash-based returns. The acquisition of Grover Charitable Gaming is in line with LNW’s cross-platform strategy. Moreover, the acquisition will likely accretive to LNW’s profitability. The company is expected to derive high single-digit adjusted NPATA (Net Profit After Tax and Amortization) in the first full calendar year post acquisition.
Strategic acquisitions have been a key part of Light & Wonder’s growth story over the years. Earlier acquisitions of Bally Technologies, WMS Industries, Parspro and Provoloto, Barcrest Group Limited, Sceptre Leisure Solutions and GameLogic have expanded the company’s ability to offer computerized systems and services to the global gaming industry.
With the acquisition of DEQ Systems, LNW benefited from the former’s EZ Baccarat, which has about 800 table games in 150 casinos globally. Tech Art expanded LNW’s gaming portfolio as well as strengthened its foothold in the international market. The buyout of the privately held mobile and social game company, Come2Play, expanded and diversified SciPlay segment’s existing portfolio of social games.
LNW Stock’s Price Movement
Shares of LNW have gained 20.2% in the past year compared with the industry’s growth of 23.9%.
Image Source: Zacks Investment Research
LNW’s Zacks Rank and Key Picks
Light & Wonder currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader industry have been discussed below.
Keysight Technologies, Inc. (KEYS – Free Report) has a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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InterDigital (IDCC – Free Report) sports a Zacks Rank #1 at present. In the trailing four quarters, it delivered an earnings surprise of 158.41%.
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