Indy Gaming: Fertittas, Sartinis belly up to the tavern business bar
Full disclosure: I spent roughly 18 months handling communications for Golden Entertainment, so I’ve always been fascinated by the tavern/restricted gaming business. Red Rock Resorts didn’t want to comment more beyond what was said on its conference call. But entering the tavern market could shake up the landscape.
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The Las Vegas casino market may soon see its own version of a family feud.
The Fertittas and the Sartinis have long played on opposite sides of the gaming sandbox. Red Rock Resorts has dominated the Las Vegas locals casino market and Golden Entertainment has single-handedly expanded Southern Nevada’s tavern industry.
Golden CEO Blake Sartini is the brother-in-law of Red Rock's top executives, CEO Frank Fertitta III and Vice Chairman Lorenzo Fertitta.
The lines between the companies blurred in 2018 after Golden’s $850 million purchase of American Casino & Entertainment Properties that included the two Arizona Charlie’s casinos. That gave the company a small piece of the neighborhood casino business currently dominated by Red Rock.
However, the lines may soon be erased.
Red Rock Resorts executives surprised the investment community last week with news the casino operator was considering growing its presence in the Las Vegas tavern business.
“It's a great place to invest in,” Red Rock President Scott Kreeger said during the company’s first-quarter conference call in response to a question posed by Macquarie Securities gaming analyst Chad Beynon.
“It’s a unique customer with a different profile than our core customer,” Kreeger added. “So, it skews younger and skews toward the sports bettor. We like that kind of customer.”
The typical Nevada tavern combines a bar and restaurant and is classified by the Gaming Control Board as a restricted location, offering a maximum of 15 slot machines.
Red Rock Resorts operates seven smaller Wildfire Casinos in Las Vegas, six of which have between 35 and 203 slot machines in locations where the gaming rights were grandfathered in following a 1997 state law written to prevent the proliferation of casinos near residential neighborhoods. The Wildfire Anthem in Henderson was not grandfathered in and is a restricted location.
Red Rock has seven resort casinos in Las Vegas with more than 3,000 hotel rooms, 15,300 slot machines and 317 table games. The company reported net revenue of $485.6 million during the first three months of 2024 from its Las Vegas operations, including Wildfire.
Golden’s primary business is its eight Nevada casinos, including the STRAT Hotel, Casino and Tower, which combined for $140 million in revenue during the quarter. It also operates 71 taverns in Nevada, including 68 in Las Vegas. The company expects to open its 72nd tavern by the end of June and have more than 90 locations in the next few years.
Beynon said in an email Monday he was asking Red Rock about “proper taverns like Sierra Gold,” an upscale brand operated by Golden — not new Wildfires.
Kreeger said Red Rock has seven tavern locations in Las Vegas under contract. Two are expected to open before the end of the year with the rest following in 2025. He didn’t say if any of the locations would fall under the Wildfire brand.
“We’re actively out there seeking to grow the number of units that we have in the market,” Kreeger said. “We think it's an opportunity for us to kind of expand into what we call the micro-market within the [Las Vegas] valley.”
A day after Red Rock discussed its tavern plans, Truist Securities gaming analyst Barry Jonas asked Sartini on Golden’s quarterly conference call about “increased competition” and “new players in the tavern market.”
“Our size and our brand is a significant competitive advantage,” Sartini said of Golden’s tavern business, which brought in more than $27.8 million in revenue in the first quarter.
Without mentioning Red Rock, Sartini said, “We’re not seeing anything in the [mergers and acquisitions] environment. We pretty much get [the] first look at anybody who wants to sell.”
According to filings with the Securities and Exchange Commission, Golden paid a combined $17.3 million to acquire six taverns in the Las Vegas area in two separate purchases between November and April.
Sartini said Golden’s legacy and large footprint in the Nevada tavern industry could stymie any competition.
“To get a significant number in a portfolio that would compete quickly, I think, would be nearly impossible from a regulatory standpoint,” Sartini said. “We believe with our footprint and our brand, we're in a good position to not only grow but continue to stay strong in the tavern business going forward.”
Las Vegas gaming equipment developer being acquired for $1.1 billion
Las Vegas-based gaming equipment provider AGS rejected a $370 million buyout offer from rival gaming developer Inspired Entertainment nearly two years ago. But a $1.1 billion buyout offer from private equity firm Brightstar Capital Partners was too good to pass up.
The agreement, approved by AGS’s board last week, will have Brightstar paying $12.50 per share to take the slot machine and table game developer private. The deal still needs a sign-off by shareholders and must pass state regulatory approvals.
“We had not heard much speculation from industry participants and/or investors on takeout optionality since AGS rejected [the Inspired offer],” Stifel Financial gaming analyst Jeffrey Stantial wrote in a research note last week. “That said, we view $12.50 per share in cash as a satisfying outcome.”
The stock purchase price was 40 percent higher than AGS’s closing price the day earlier on the New York Stock Exchange.
Brightstar Capital was founded in 2015 and has $4 billion in assets focused on industrial manufacturing and services. However, several of the firm’s partners have gaming experience, notably Roger Bulloch, who oversaw Sher Gaming from 2004 to 2010 and owned three Laughlin casinos.
AGS has moved beyond its beginnings as a small slot machine provider to tribal gaming markets. The company went public in 2018 at an initial price of $16 per share. Stock in AGS rose to a high of roughly $32 a share that year, but fell back in value in 2019.
It’s expected that AGS’s current management will continue to operate the company as a private entity. In a statement, CEO David Lopez said Brightstar’s ownership would help AGS expand its research and development division.
“We would expect AGS to continue to grow organically under the same leadership,” B Riley Securities gaming analyst David Bain wrote in a research note, suggesting the company return to the public financing sector “after growing and further strategic positioning into a better stock market environment.”
He added the new ownership would allow AGS to acquire undervalued rival gaming equipment providers.
What I'm reading
SBC Summit: Sports betting in California depends on respecting and protecting tribal sovereignty — Rege Behe in CDC Gaming Reports
There is hope in California. Operators and the tribes are learning to play nice.
Expansion of Encore Boston Harbor casino in Everett suspended due to impasse — Colin A. Young in State House News Service
Wynn Resorts’ $400 million non-gaming expansion is on hold in a dispute over taxes and impact fees.
Betting money for the WNBA is pouring in on Caitlin Clark and the Indiana Fever — Mark Anderson in The Associated Press
Sportsbook operators said the Fever is their highest liability from future bets placed on total wins and the WNBA championship.
News notes and quotes
What CEOs are saying on first-quarter earnings calls
“[I have] confidence we will capitalize on upcoming launches such as Squid Game. If you look at the most anticipated games [by casinos], number two [on the list] is Squid Game.”
- Light and Wonder CEO Matt Wilson on May 8 discussing the company’s slot machine unveiled at G2E last fall that is based on the Netflix television series.
“Building a Sphere it's not like building a McDonald's. It's complicated. It's a very expensive project. There has been plenty of interest over the year, but not until we launched the product in late September that people really [saw] what it was and began to see how it could perform.”
- Sphere Entertainment CEO James Dolan on May 10 about bringing a version of the $2.3 billion Sphere in Las Vegas to international cities.
“We're not building on spec, put it that way. [The UAE] created a federal regulatory body to license … and issue regulations associated with gaming. The [General Commercial Gaming Regulatory Authority] activities are ongoing. We are aware of what they are, and we'll get all the necessary approvals in due course.”
- Wynn Resorts CEO Craig Billings on May 7 about the regulatory process in the United Arab Emirates where the company is building a $3.9 billion resort in Ras Al Khaimah.