Full Press Release Details
GAGNIER COMMUNICATIONS
Moderator: Lindsay Barber
01-07-20/4:15 p.m. ET
Confirmation # 7934997
GAGNIER COMMUNICATIONS
Moderator: Lindsay Barber
All participants are in a listen-only
mode. Should you need assistance, please signal conference specialists by pressing the "star" key, followed by "0."
After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.
I would now like to turn the conference
over to George Peng, CFO of Leisure Acquisition Corporation. Please go ahead.
A replay of the call and the accompanying
slide presentation will be archived in the investor information section of the Leisure website. Please also refer to the safe harbor
language on page two of the presentation.
Statements we make during this
call, that are not statements of historical facts constitute forward-looking statements. These statements are based on Leisure's
and Gateway's management's current expectations or beliefs and are subject to risks, uncertainties and other factors that could
cause our actual results to differ from historical results and/or from our forecast, including those set forth in Leisure's SEC
GAGNIER COMMUNICATIONS
Moderator: Lindsay Barber
01-07-20/4:15 p.m. ET
Confirmation # 7934997
All cautionary statements that
we make during this call are applicable to any forward-looking statements we make wherever they appear. Do not place undue reliance
on forward-looking statements which we assume no responsibility for updating, except as may be required by law.
In addition, certain non-IFRS financial
measures will be discussed on this call. References to non-IFRS financial measures are only provided to assist you in understanding
Gateway's results and performance trends and should not be relied upon in lieu of IFRS results. Lastly, all references to currency
in this presentation unless otherwise noted are to Canadian dollars.
I'll now turn over the call to
Daniel Silvers, CEO of Leisure.
You can see an overview of each
of their backgrounds on slide one, and I trust that you will find that with the many years of financing and gaming industry senior
management experience this team collectively possesses that this is truly an impressive group.
Slide three provides an overview
of the transaction. It is something we are all excited about and looking forward to reviewing in more detail on the call today,
and as we meet with investors in the coming weeks.
The transaction, which is valued
at 7.5 times 2020 projected adjusted EBITDA before fees and expenses for Gateway, is exactly the type of target acquisition we
discussed bringing to investors at the time of our IPO. And as you will see when we file our preliminary proxy statement, we had
our eyes on Gateway almost immediately following the closing of our IPO.
GAGNIER COMMUNICATIONS
Moderator: Lindsay Barber
01-07-20/4:15 p.m. ET
Confirmation # 7934997
We believe this transaction is
highly attractive, given the favorable multiple of 2020 projected adjusted EBITDA, relative to what we view as an appropriate peer
group. The attractive free cash flow conversion of Gateway, the strong alignment between the public Leisure shareholders and the
current Gateway shareholders, with earnouts and upside structured around stock price depreciation, to maintain this alignment for
the benefit of all of our shareholders. The addition of incremental management talent from the Leisure side, and the significant
financial commitment demonstrated by H.G. Vora's investment on top of their prior investment, which totals in aggregate capital
commitments in excess of $100 million U.S.
On the next slide, we present a
summary of sources and uses, capitalization and pro forma ownership. The three key takeaways here are, one, between the potential
SPAC trust proceeds and H.G. Vora's additional cash equity investment, Gateway's balance sheet will be delevered by up to approximately
$165 million U.S, two, that Catalyst, H.G. Vora and other current Gateway shareholders will be significant shareholders in the
merged company, and three, that the implied enterprise value of Gateway is approximately $1.1 billion U.S., representing as I noted
earlier, a compelling 7.5 times multiple of 2020 projected adjusted EBITDA, and just 6.8 times 2021 projected adjusted EBITDA.
Additionally, we believe we will
have positioned this company's balance sheet for growth going forward.
On slide five, you will see a summary
of the expected timing of the transaction which we currently expect to close in the second quarter of 2020. We believe the most
notable items from a timing perspective are the SEC process for the shareholder vote and the gaming regulatory process. Fortunately,
Lorne, Marc and I all have quite a bit of experience in each of these.
I spoke earlier about our view that we are creating
this company at a compelling valuation for our shareholders. On slide six, you will see a summary of Gateway versus what we believe
to be the relevant comp set. We believe these comps confirm our thesis that when considering Gateway management's projections for
2020 or for 2021, we have created this company at an attractive valuation and a meaningful discount to these comps.
GAGNIER COMMUNICATIONS
Moderator: Lindsay Barber
01-07-20/4:15 p.m. ET
Confirmation # 7934997
Later in the presentation, you
will see the very favorable free cash flow conversion characteristics of Gateway that are quite unique in comparison to the U.S.
regional operator comps most of you are very familiar with. We believe this free cash flow conversion model makes this an even
more compelling transaction and go-forward investment.
I mentioned H.G. Vora's involvement
earlier and I suspect many of you are familiar with them; but Lorne and I are equally excited to be partnering with Gabriel de
Alba and Catalyst. As you will see on slide seven, Catalyst is a Toronto-based private equity firm that has overseen and helped
to foster significant value creation for all existing Gateway shareholders, and we are thrilled that they have elected to remain
significant ongoing shareholders and that Gabriel has agreed to remain the executive chairman of the combined company.
With that, I'd like to invite Gabriel
to say a few words. Gabriel?
The Canadian gaming sector is quite
unique with high barriers to entry. On a province by province basis, it has also been going through a process of modernization.
This is a true advantage for Gateway and the white space that we saw a decade ago and we continue to see going forward.
Since acquiring Gateway's equity
in 2010, we have worked with management to implement the technical strategy to introduce many of the best practices that exist
in the U.S. and in the Asian markets. This includes enhanced customer experiences, development of a true gaming and entertainment
platform across all of our assets, and targeted brand strategies in F&B that appeal to different markets based on demographics.
GAGNIER COMMUNICATIONS
Moderator: Lindsay Barber
01-07-20/4:15 p.m. ET
Confirmation # 7934997
We are very proud of the team and
their many accomplishments over the last six years, which include doubling our locations and adjusted EBITDA, maintaining operational
to free cash flow conversion ratio and maintaining financial discipline across our operations and growth initiatives.
Indeed, in the same six-year period,
Gateway increased slot machines by nearly three times, table games by over two times, and added 56 new F&B outlets across British
Columbia and Ontario. The discipline execution of our near and long term strategies has created significant value and returns over