Ardent Leisure Group set to cash in on US arcades business and turn focus to theme parks

After several years of M&A interest in their US arcades business, Ardent Leisure Group (ASX: ALG) is set to offload their Main Event business to US operator Dave & Buster’s for USD $835 million on a cash and debt free basis. 

The Group, alongside co-owner RedBird Capital Partners, is selling retail entertainment business Main Event for USD $835 million on a cash and debt free basis. 

With their equity stakes, Ardent is set to pocket USD $487m (AUD $649m) which they intend returning mostly to shareholders. The remainder will head towards co-owner RedBird Capital Partners which acquired a 24.2% stake in the arcade business in June 2020 for USD $80m. 

In addition to that, RedBird was granted an Option to acquire an additional 26.8% interest in Main Event from Ardent Leisure exercisable between July 2022 and July 2024, which will be exercised prior to the sale to Dave & Buster’s. 

Main Event Entertainment has seen a considerable uptick in business with the easing of COVID restrictions, allowing more people to visit their locations to play laser tag, go bowling or try their luck at arcade games. Acquisitions of three additional locations in Colorado last month has brought Main Event’s location count to 50 centres across the US. The business reported USD $98.4 million revenue and USD $52.0 million EBITDA for the six months ended 31 December 2021. It was this US based business that kept Ardent Leisure alive throughout the COVID pandemic whilst Australian activities were largely furloughed. 

Following the sale of their US operations, Ardent Leisure will focus solely on its theme parks business now that largely restriction free Australians can enjoy roller coasters and fairy floss abound.The Company intends to use the proceeds of the sale to settle debt and repay deferred settlements to the ATO before distributing approximately AUD $430 million to shareholders ($0.90/share). The Company itself will retain AUD $150 million in cash which will support upcoming growth and development plans.

Ardent Leisure chairman Dr Gary Weiss commented on the sale, saying: “The Transaction reflects the significant value creation that has been achieved by Ardent Leisure and the Main Event management team, particularly over the past four years following the overhaul of the Ardent Board in September 2017 and the appointment of Chris Morris as Chief Executive Officer of Main Event in March 2018. 

“During this period, Main Event has expanded its centre footprint by over 30% and more than doubled EBITDA. Following the investment by RedBird Capital Partners in June 2020, Main Event was able to successfully navigate the challenging period of the COVID-19 pandemic and reestablish operations effectively, generating record revenues over the last twelve months.”

The deal will be presented to shareholders to vote on in the EGM later this year. The Board of Ardent Leisure is set to make a unanimous recommendation in favour of the sale.