Who Will Buy CG Technology?

Mar 28, 2017 3:00 AM

CG Technology (CGT) and its sportsbook operations has been the subject of numerous rumors and speculations about being up for auction by its majority owner Howard Lutnick, with suggested opening bids ranging from $15 million to $50 million. But what is the business worth, what is actually for sale, what is the number it would take to hold the attention of a multi-billionaire seller and who are the likely viable interested buyers for the company?

The quick way to get an idea about what something is worth is to look to see what comparable assets sold for previously. The last time material-sized sportsbooks changed hands, was back in 2011 when William Hill bought the Cal-Neva, Lucky’s and Leroy’s sportsbooks for roughly $54 million. Inflation adjusting that number in today’s dollars would suggest a price of roughly $64 million.

That price though was for a large number of small “hole-in-the-wall” sportsbooks, not for luxury, high tech, trophy Strip resort books filled with easy tourist money. Nor did it include a mobile gaming component or a licensed line-maker. While the principal focus is obviously on CGT’s sportsbook operations, both the mobile gaming component and licensed line-maker portions of the business in the right hands can be worth serious money on their own.

Let’s start with a base price of $64 million, add $10 million for the line making business, $20 million for the mobile gaming business and a conservative $30 million for the location status of their Strip books and we get to a probable legitimate opening number for serious conversations around $124 million.

Add to the mix speculations that it is only a function of “when” not “if” the United States Congress will revisit and eliminate the current prohibitions on sports wagering and the opportunity premium that could be added to the business value could be anywhere from $25 million to $100 million more.

But wait, there is more. An online review of gaming related patent filings held by affiliates of CG Technology shows a lot of interesting and potentially very lucrative gaming patents, which if included or licensed to go along with the sale of the company could fetch yet another premium to the sale price.

While global sports wagering companies like Paddy Power and Bet Fair should be aggressively interested in buying CGT as a material entry point opportunity for sports wagering in the USA, a company like William Hill should be interested in buying CG Technology to keep Paddy Power and Bet Fair out.

If William Hill became the ultimate buyer of CGT, what a strange twist of fate, if not ironic series of events, that would have become. William Hill and one of its senior executives, Joe Asher, have been embroiled in a protracted lawsuit with CG Technology and their affiliates. The case is seemingly not too far off from entering the damages phase. Because of the likely probability of CG Technology and its affiliates prevailing over Asher and William Hill, if William Hill were to try and buy CGT they would likely need to pay a price that also included an amount equal to the probable damages to be awarded from the lawsuit on top of the value of the business.

Aside from global sportsbook operators, believe it or not, certain slot machine manufacturers are becoming likely tire kickers in the realm of potential buyers for CGT. With the rise of fantasy sports, eSports and the specter of the possible permitting of nationwide sports wagering, it only make sense for slot manufactures to look at joining the fray as both a global business opportunity and client (casino operators) service relation expansion opportunity.

By being a sportsbook service provider, the slot manufactures could add yet even more fee and percentage participation service options to their client casinos both domestically and globally not to mention possibly securing rights or licenses to some of the above referenced patents.

If we were a few years further into the future, it would not be out of line to build a case that the NBA, MLB or even NFL could be viable suitors for the company. However, as we are in the here and now, the likely ultimate buyer for CG Technology, depending on what assets are really available for sale, will likely be a well-funded global slot manufacturer who sees the company as a vehicle to expand into several additional lines of business while also acquiring some key long term gaming patents. 

It would also not be a surprise if in whatever deal happens it ends up being for stock and not necessarily cash, and in amounts  far and above the first rumored $15 million

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