Beverly Hills-based talent and entertainment holding business Endeavor Group followed through on its plan to acquire the sports betting company OpenBet Inc. in an $800 million deal with Light & Wonder Inc.
The price tag, which will be paid through a combination of $750 million in cash and shares of Endeavor’s Class A common stock, apparently represents quite a deal for Endeavor, which had initially committed to a $1.2 billion purchase in September of last year.
Sometime between that initial announcement and the notice of sale filed by Las Vegas-based Light & Wonder — a gambling equipment manufacturer known until recently as Scientific Games Corp. — the purchase price fell by $400 million.
“The drop in valuation for OpenBet is a result of overall decrease in market value for both public and private companies,” said Dean Kim, the head of equity research for the Playa Vista-based William O’Neil + Co. “As interest rates rise, valuation multiples decline and M&A deals will need to adjust accordingly.”
Kim, who was not involved in the deal and commented as a third-party observer, said that when the initial $1.2 billion offer was announced last year, the market was still in an uptrend with a low Fed policy rate.
“Since then, the Fed started its tightening action by talking about and subsequently raising interest rates as well as quantitative tightening. So the drop in purchase price does not surprise me,” said Kim.
With more than 1,000 employees on staff globally, OpenBet focuses exclusively on licensed customers and regulated global gaming markets serving a customer base that includes many top-tier sportsbooks such as DraftKings and FanDuel. According to OpenBet, it “specializes in betting engine technology,” processing billions of bets annually, as well as trading, pricing and risk-management tools.
It supplements those transactions with related businesses like Bet Builder, which allows bettors to gamble on multiple outcomes of the same game, and DonBest, an analysis and odds site that describes itself as “the industry’s most formidable sports handicapping team.”
In a statement, Endeavor Chief Executive Ariel Emanuel said OpenBet and IMG ARENA will form a fourth operating segment for Endeavor — known as Sports Data & Technology — beginning in January 2023.
“The addition of OpenBet to our sports betting portfolio will enable us to further capitalize on the massive tailwinds in the fast-evolving sports betting ecosystem and lead the way in defining the future of sports betting entertainment,” Emanuel said in a statement. “In combination with our IMG ARENA sports data and content business, we’ll look to create and unlock meaningful value for our rights holder and sportsbook customers, helping deliver the most compelling offerings for sports fans globally.”
In an accompanying statement, OpenBet Chief Executive Jordan Levin said their team had “been awaiting the day when we can bring together everything OpenBet has to offer with the depth of expertise and relationships that Endeavor and IMG bring to the table.”
“Our focus remains on providing our customers with the most innovative solutions to give their fans the ultimate sports betting complement to live sports. We couldn’t be more excited to lean into the Endeavor network to accelerate and amplify that mission,” said Levin.
The Raine Group acted as exclusive financial advisor to Endeavor on the transaction. Latham & Watkins acted as legal advisor to Endeavor.
