Churchill Downs Sells Big Fish Gaming for $990 Million

Churchill Downs Inc. (CHDN) has agreed to sell its mobile gaming subsidiary, Big Fish Games, to Aristocrat Technologies for $990 million (ROI of 14%); with the transaction scheduled to close in Q1 ‘18. The sale will enable the company to refocus its efforts on growing the Kentucky Derby, expanding its casino segment, (and other forms of real money gaming) and maximizing thoroughbred racing operations. CHDN held the gaming company for just over 3 years, having acquired Big Fish in 2014 for $885 million. While Big FishGames operated on slimmer margins than the balance of CHDN assets, it still comprised 37% of company revenue and 20% of profits; shareholders must be concerned about how the company plans to replace that business.

Howie Long-Short: Aristocrat Technologies is a subsidiary of Aristocrat Leisure Limited (OTC: ARLUF), a publicly traded gaming company that operates in more than 90 countries. The acquisition makes Aristocrat the 2nd largest social casino publisher globally (far behind Playtika). In Q2 ’17, Playtika controlled 26.1% of the total market (expected to grow to $19 billion by ’22); with ARLUF and CHDN combining for just12.2% combined.

Fan Marino: Yum Brands (YUM) has pulled out as the title sponsor of the Kentucky Derby. The Louisville based Brown-Forman Corp. (BF.B) will take over as the event’s highest profile sponsor in 2018; using the exposure to promote its Woodford Reserve bourbon. Terms of the deal were not disclosed, but it’s estimated that YUM paid $1 million/year under the terms of the agreement signed in 2006. The mint julep is the traditional beverage of the Kentucky Derby. If you’ve never had one, here is a recipe (using Woodford Reserve, of course).

Churchill Downs selling mobile gaming company for almost $1B

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