FAST Acquisition Corp. (NYSE:FST) has entered a definitive agreement to combine with casino, restaurant and hospitality group Golden Nugget/Landry’s at an enterprise value of $6.6 billion.

The group includes five casinos and 557 restaurants including brands like Morton’s Steakhouse and Bubba Gump Shrimp across 38 states, DC and Puerto Rico with 41 units located internationally.

The deal is expected to close in the second quarter of 2021.

Transaction Overview

FAST brings about $200 million from its current trust into the deal, which is dwarfed by the $1.24 billion PIPE at $10 per share arranged alongside it. The target group includes Golden Nugget Online Gaming Inc. (NASDAQ:GNOG), which itself just de-SPAC’d on December 29 from its $745 million combination with Landcadia Holdings II.

The popularity of that deal may have been a significant contributor to the price as its shares surpassed $25 after the combination closed and now sit at about $18 with market cap of about $1.2 billion. The transaction for its parent will involve 31,350,625 shares (46%) of GNOG shares and a majority (79.9%) of its voting rights.

Golden Nugget aims to use proceeds to pay down an amount of debt equal to the PIPE dollar-for-dollar at $1.24 billion. The company expects to add $120 million to its balance sheet after $80 million in transaction fees – an unusually high figure for expenses, but understandable given the complexity of the deal.

The deal only requires FAST to maintain $5,000,001 in cash available to close, which it needs for NYSE listing requirements at any rate. But the deal does also allow for termination due to force majeure and interestingly includes the COVID-19 pandemic in its list of examples.

Golden Nugget owner Tilman Fertitta is expected to maintain majority of shares following close with 59%, while PIPE investors are expected to own 34.6% and FAST shareholders take 5.6%. FAST’s sponsor has agreed to forfeit 2,000,000 founder shares (40%) with the remainder representing 0.8% of the combined entity’s equity.

Fertitta is expected to continue to run the combined entity as chairman, president and CEO, while FAST Chief Brand Officer Eugene Remm is set to join the company’s Board.

Quick Takes: Fertitta said in today’s press release that he made the decision to do the deal after surveying “today’s opportunistic world.” I’m not sure the world has ever not been opportunistic for Fertitta, having taken his companies public, then private, then public again over the past three decades.

With SPACs having their present heyday, it was only natural he would combine the group with a SPAC 34 days after finishing combining his own SPAC with a division of the group.

Fertitta said in 2013 that he would “never” take the group public again, as the group could find financing for aggressive acquisitions without having to worry about quarter-to-quarter numbers. That reality is clearly much different for restaurants and hospitality a year into a global pandemic.

The transaction will take a 26% bite out of Golden Nugget/Landry’s $4.6 billion in pre-transaction debt and give it more flexibility as hospitality climbs out of the pandemic slump. This still leaves $3.24 billion in pro forma net debt, but the group expects about $575 million in adjusted to EBITDA in 2021E that nets to $319 million in free cash flow before further debt pay-downs. In 2022E it expects these figures to grow to $648 million and $378 million, respectively.

Restaurants account for about 72% of the group’s pre-pandemic revenue while gaming and gambling accounted for 40% of its EBITDA. Moving forward, the group plans to keep the focus on the latter portion of its portfolio using M&A to build out gaming offerings with an eye on some opportunistic restaurant and entertainment deals.

The parties’ presentation is light on full-year 2020 numbers, but it shows that topline revenues contracted 38% in 2020E from $3.4 billion to $2.1 billion while EBITDA slumped 58% from $601 million to $251 million. It projects a rebound to $2.8 billion in revenue for 2021E, but does not expect to get back to topline numbers comparable to 2019 until 2023E.

Valued at 9.25x its 2022E EBITDA, the group comes at only a slight discount to its peers in entertainment, restaurants, all but one of which it lists trade in a range of 15.6x to 8.2x.

All of this makes it quite different from the size and shape of deals SPAC investors have grown used to over the past six months. Rather than a story about a scrappy new company using a SPAC combination as a launch pad, this is one of a legacy empire using the vehicle to get itself through a rough patch.

Click here for the full investor presentation.

ADVISORS

• Latham & Watkins LLP is acting as legal advisor to Fertitta
• Jefferies LLC is acting as financial advisor and capital markets advisor to Fertitta.
• Jefferies LLC acted as lead placement agent on the PIPE.
• Both Winston & Strawn LLP and White & Case LLP are acting as legal advisors to FAST.
• Citigroup Global Markets Inc. is acting as sole financial advisor to FAST
• Citigroup Global Markets Inc. and UBS Investment Bank are jointly acting as capital markets advisor to FAST.
• Goodwin Procter LLP and Skadden, Arps, Slate, Meagher & Flom LLP are acting as legal advisors to Jefferies LLC.