Light & Wonder (L&W), a huge gaming company, buying Grover Gaming's charitable gaming assets could be the first of many deals in the industry. 
UK Tote Group takes in new senior leadership 
According to a Tuesday (18 February) press release, L&W will pay $850 million (£675.5 million/£815.4 million) in cash up front, along with a four-year earn-out arrangement worth up to $200 million. The acquisition is scheduled to finalise in the second quarter of this year. 

Analysts reacted warmly to the announcement and one speculated that L&W will be at the leading edge of a fresh round of acquisitions. 

Frank Fantini, a gaming analyst for a long time and the creator of Fantini Research, has been following L&W since the beginning. He thought that the growth of related industries, like charitable gaming, gives big companies a chance to get into a market early by buying up well-known brands. 

Fantini told iGB that "traditional, conventional game companies" would start buying up other regional companies like Grover. He remarked, "I think this could be the first of many acquisitions in that field." 

Analysts positive in terms of value 
Fantini added that the 7.7x AEBITDA multiple was good for valuation, especially because there were still cost-cutting and growth prospects ahead. 

He remarked, "If you think about it, gaming tech companies probably sell for 10 times EBITDA, so it's actually immediately good for their earnings." "It's worth less than what their own stock is selling for. So in that case, they have it made in that area. 

Other places also had good reactions. The Macquarie team awarded the company a "outperform" rating and called its note "Finding their four leaf Grover." 

“LNW’s acquisition of Grover Gaming’s Charitable Gaming Assets adds a long-term growth driver through expansion into a new adjacency,” analysts added. "In the short term, we still believe that the $1.4bn EBITDA target for 2025 is achievable without this acquisition, thanks to strong gaming momentum, double-digit growth in igaming, and steady SciPlay profitability." We expect a 13% EBITDA CAGR (excluding stock compensation) over the next three years, with earnings growth in all three verticals. 

“Move over Big Bird” 
Barry Jonas from Truist Securities similarly followed the pattern and called his note "Move over Big Bird." Jonas, like Fantini, said the valuation was "attractive" and pointed out the growth opportunities it would bring. 

Jonas wrote, "By buying Grover Gaming's assets, LNW can use its content to reach new customers in the charitable gaming space, which is hard to get into." 

L&W said it paid for the purchase with cash on hand and new debt, but it anticipates its net debt leverage ratio to maintain between 2.5x and 3.5x, which is what it wants. The corporation is also sticking to its goal of $1.4 billion in consolidated AEBITDA by 2025. 

According to the statement, Garrett Blackwelder, the founder of Grover, will stay on as an advisor "to help drive the continued success of the business over the next three years." L&W claimed that its revenue and AEBITDA for 2024 were $135 million and $111 million, respectively. 

L&W will now be in charge of Grover's 10,000+ leased electronic pull-tab equipment. The corporation is established in North Carolina and does business in five other states: North Dakota, Ohio, Virginia, Kentucky, and New Hampshire. 

Wilson: The deal is a major step forward for charitable gaming. 
Matt Wilson, the CEO of L&W, made it clear on an investor call late Tuesday that his company is quite positive about the charitable gaming sector. As development on new laws slows down again this year, especially for igaming, these proven adjacencies have grown more appealing and profitable. 

Wilson told investors, "I think the most obvious way for us to drive the top-line growth of the Grover assets we own is to use our RND arsenal in the charitable gaming sector." L&W has invested billions of dollars on R&D over the past few decades. Making fantastic franchises, game math, and art innovations in a lot of different firms. We want to aim that cannon right at the charitable market. 

Wilson noted that Minnesota and Maryland are the next two most important states for growth. He explained that L&W had tried entering the charitable industry organically, but the fragmented client base makes it challenging. Grover has 1,500 consumers in five states, whereas L&W has 700 customers across all of North America. 

"We could have built it up naturally, but it might have taken us five, six, or seven years to get to this level of scale," Wilson said. “We get to buy 10,000 units immediately and then layer in our content.” 

E-pull tabs and gaming for charity 
As the name suggests, charitable gaming is a way for most of the money to go to local groups. In states that don't usually like gaming, it is frequently considered as a better way to grow. The types of games that are accessible and the laws that govern the industry are very different from state to state. There are rules about which groups can run the games, but the industry has quietly grown into a big financial opportunity. 

Harbour Compliance says that charitable gambling is permitted in all except two states, Hawaii and Utah. Alabama, Maryland, Pennsylvania, South Dakota, Vermont, and Wyoming are some more places that work at the county level and don't have state frameworks. 

Pull tabs are basic game cards that look like lottery tickets. Players pull open small holes in the cards in the hopes of earning small prizes. There are both paper and electronic versions of them, called e-pull tabs. The electronic versions take the games and put them in a cabinet that looks like a slot machine to make it feel more like real casino gaming. Thus, they are similar but not identical to other verticals like Class II machines, video lottery terminals (VLTs) and historical horse racing (HHR) machines. 

There are 11 places where e-pull tabs are legal and 40 states where paper items are legal. Both variants are popular among veterans and humanitarian groups such as the Veterans of Foreign Wars (VFW), American Legion and others. 

L&W wants to move its already popular games on Grover's e-pull tab machine basis. Wilson remarked on the investor call that his company has a lot of expertise bringing games to other platforms, like the ones listed above. 

“It’s not exactly the same, but we know how to do it – we’ve proven this out in many adjacencies,” he asserted. 

L&W's most recent change in direction 
The purchase is the most recent chapter of a corporation that has changed a lot in the last ten years. L&W, which was previously called Scientific Games, was a very diverse and leveraged corporation in the 2010s. It had spread to essentially all sorts of gaming and had overextended itself in the process. 

Then, in June 2021, the corporation said it will make big changes. It sold off its sports betting and lottery sections so it could focus on games, which is what it does best. In April 2022, Brookfield Business Partners bought the lottery business for $5.8 billion. In September of that year, Endeavour bought the sports betting segment for $800 million. The corporation also finished a lot of debt refinancing around the same period. 

L&W has done quite well since then. The price of its stock has gone up from the mid-$70s when it sold to $106 at the time of writing. By all accounts, it has entrenched itself as a top-three supplier alongside Aristocrat and IGT. The Grover deal is now the biggest investment the corporation has undertaken since it became more efficient.