LOUISVILLE, Ky. (November 12, 2014) – Churchill Downs Inc. and Big Fish Games Inc., one of the world’s largest producers and distributors of mobile and online games, said Wednesday afternoon they have entered a deal under which CDI will acquire Big Fish in a transaction that could be worth $885 million.
CDI last month had reported that its third quarter revenues of $173.7 million were down 6 percent from 2013, saying this was “primarily due to the leasing of pari-mutuel operations at Calder Race Course and the loss of Texas online wagering” plus “generally soft regional gaming trends as well as declines in Racing Operations’ handle resulting from smaller field sizes at Arlington.”
Louisville-basedf CDI owns and operates Churchill Downs Racetrack as well as racetrack and casino operations in Miami Gardens, Fla.; racetrack, casino and video poker operations in New Orleans; racetrack operations in Arlington Heights, Ill.; a casino resort in Greenville, Miss.; a casino hotel in Vicksburg, Miss.; a casino in Oxford, Maine; and a 50 percent owned joint venture, Miami Valley Gaming and Racing LLC, in Lebanon, Ohio. CDI also owns online wagering company TwinSpires.com; the totalisator company, United Tote; Bluff Media, an Atlanta-based multimedia poker company; and a collection of racing-related telecommunications and data companies.
The Big Fish deal is structured on a cash-free/debt-free basis with a base consideration of $485 million and a potential earn-out payment of up to $350 million based on 2015 Adjusted EBITDA, plus a potential bonus Big Fish founder and CEO Paul Thelen of $50 million based on 2016 bookings. The purchase price will be paid in cash, except for approximately $15 million paid in CDI common stock to Thelen.
The upfront payment represents a multiple of approximately 8.5-times Big Fish’s Adjusted EBITDA (including an adjustment for changes in deferred revenue) for the trailing 12 months ended September 30, 2014, of $57.3 million. The earn-out payment will be calculated by applying a multiple of nine-times the increase in calendar year 2015 Adjusted EBITDA over a base value of $51.2 million — except that for purposes of the earn-out calculation the adjustment for change in deferred revenue will be reduced by subtracting expected costs associated with such deferred revenue.
The merger has been approved by the Boards of Directors of both companies and is conditioned upon receipt of required regulatory approvals and other customary closing conditions. Subject to the satisfaction of these conditions, the transaction is expected to close by the end of the year.
“The acquisition of Big Fish and our entry into the rapidly growing mobile and online games industry gives us new products, new customers, new geographies and new sizeable growth opportunities,” said Bill Carstanjen, CEO of CDI. “While many will view this transaction as a logical extension to what we currently do with Twinspires.com, what is most important to us are the strong team and the processes and capabilities that have been built by Big Fish in Seattle, Oakland, Calif., and Luxembourg. We are excited to announce this transaction and believe we will do great things together.”
“We are extremely proud of the company we have built over the last 12 years,” Thelen said. “Churchill Downs is a company with a commitment to interactive entertainment and a track record of growth and performance. We believe Big Fish is now positioned to become an even greater force in the casual, mid-core and social casino mobile and online games industry. Churchill Downs is a great cultural fit for us and we are thrilled to be joining the Churchill Downs family.”
Goldman Sachs is acting as financial advisor and Sidley Austin LLP is acting as legal advisor to CDI. JPMorgan is acting as lead on the financing of this transaction.
Qatalyst Partners LP is acting as financial advisor and Perkins Coie LLP is acting as legal advisor to Big Fish on this transaction.
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