Scientific Games offer for NYX Gaming is fair, M Partners says

Scientific Games proposed acquisition of NYX Gaming (NYX Gaming Stock Quote, Chart, News: TSX:NYX) is a fair one, says M Partners analyst Zach Greenwald.

On Wednesday, NYX Gaming announced it had agreed to be acquired for approximately $775-million by Las Vegas-based Scientific Games Corp.

“Scientific Games’ acquisition of NYX will provide immediate and compelling cash value for our shareholders, expand the products and solutions we are collectively able to offer our customers, and accelerate the execution of our long-term strategic plan,” said NYX CEO Matt Davey. “We will now have scale, content and product development capabilities, complementary global infrastructure, and access to an expanded customer base. We believe Scientific Games is the ideal partner for NYX, and we look forward to working alongside the talented Scientific Games team.”

Greenwald, who had a “Buy” rating and one-year price target of says this deal makes sense, as the implied purchase price of 8.1x 2018 EBITDA is slightly better than his 8.0x target.

“Scientific Games will further strengthen their leadership position and ability to provide the broadest portfolio of content, technologies and digital products and services for its global Gaming and Lottery customers,” the analyst says. “Following the acquisition, Scientific Games will own OpenBet, the number 1 global sports betting platform, thus positioning the company to capitalize on the future regulatory developments in real-money wagering. Scientific Games will also be able to leverage NYX’s worldwide channels and customer base to offer new growth opportunities in the company’s interactive gaming business. This defends our thesis that the company was undervalued relative to peers and had positioned itself as a major B2B gaming provider with a diversified revenue stream. Recent results from B2B peers and B2C operators, several of which are NYX’s customers, had shown double digit YoY growth in sportsbook and casino. NYX’s strategy to shift its focus towards these industry growth segments is a central theme behind our thesis, which we believe will drive significant organic revenue growth. At a deal price of $C2.40, we believe the acquisition is fairly priced.”