Current Price: $29.6
Target Price: $34+
Upside: 15%+
Expiration Date: H1 2026
This is a pretty bizarre example of a lowball management buyout. The situation is very fresh, but it has already drawn two activists who published open letters to shareholders and the board: Everbay Capital (letter) and Rangeley Capital (letter). Both notes explain the setup well and are definitely worth reading. Below is a brief summary with a few extra details.
The chairman of Golden Entertainment is buying the company’s operating business at a 1x EBITDA multiple. Management owns 30% of the stock. Given how egregious the offer is and the fact that stockholder approval is required, there is a reasonable chance that shareholders will be able to force a higher price. Activist estimates suggest the bid could be increased by at least 30%. A 15%+ bump seems very realistic to me and would not even require the buyer to draw on any additional financing. GDEN currently trades at the offer value, so the potential downside seems limited.
Golden Entertainment is a Nevada-based gaming company that operates 8 casinos and 72 taverns. Its key asset is the STRAT Hotel, Casino & Tower in Las Vegas. GDEN is one of the few remaining casino operators that still owns the underlying real estate. Management has repeatedly argued that the stock price reflects only the value of the real estate and completely ignores the profitable operating business. For more than a year they have been running a strategic review and hinting at a potential sale-leaseback transaction that could unlock value.
The wait ended on November 6, when GDEN announced a sale-leaseback of its 7 largest casinos to VICI, a giant casino focused REIT. In exchange, VICI will assume GDEN’s debt and issue 24.3m shares, which Golden Entertainment plans to swiftly distribute to shareholders at a ratio of 0.902 VICI per GDEN share. The value of the stock distribution is $27.5/share, compared to GDEN’s pre-announcement price of ~$21/share. The value unlock has been successful. So what’s the problem?
The problem is that the sale-leaseback has been bundled with a second transaction: GDEN’s chairman, Blake Sartini, will take the remaining operating business (“RemainCo”) private for $2.75/share in cash. This values the RemainCo at around $75m. After deducting the pro forma rent expenses from the leaseback, the operating business generated $60m of EBITDA over the last twelve months and is expected to make $64m next year. The filings so far do not clarify whether GDEN’s excess land is also being acquired by VICI. If it is not (meaning it stays with the RemainCo), the effective privatization multiple falls to 0.3x EBITDA.
GDEN’s peers (CZR, PENN, MCRI, RRR) trade at 7–8x NTM EBITDA. MGM recently announced the sale of MGM Northfield Park operations at 6.6x EBITDA. GDEN’s operating business may be of somewhat lower quality, but it is certainly worth more than 1x EBITDA. Everbay Capital estimates that multiple should be at least 5.5x EBITDA, which equals to $12/share. Combined with the proceeds from sale-leaseback, the total consideration would then be $39.5/share, implying 33% upside from current levels. If the privatization was not bundled with the real estate transaction, GDEN would likely be trading around $39/share already. This $250m price difference may end up in the chairman’s pocket instead.
Everbay Capital has neatly summed up the chairman’s play:
The Transactions appear to be strategically timed to justify selling RemainCo to Blake Sartini at a heavily discounted price based on the idea that shareholders are receiving a premium. […] By bundling the real estate sale and the RemainCo sale into a single transaction agreement, the Board is functionally forcing shareholders to accept this woefully inadequate price for RemainCo as a condition for selling the real estate. There is no logical reason for these two transactions to be bundled.
Funny enough, management has even made an effort to cover its tracks. As noted by Rangeley Capital, GDEN quietly removed all conference calls and presentations (which included a lot of comments and slides on valuation) from the investor website. And in GDEN’s own announcements, they left out the pro-forma rent expense from the sale-leaseback, which conveniently makes the profitability of the remaining business a bit harder to see. That rent expense ($87m) appears only in VICI’s filings.
The activists are now pushing management to split the sale-leaseback from the privatization and put each to a separate vote. They also want a clear account of how the strategic review was actually run and how anyone concluded that $2.75/share is a fair price for the remaining business. They are demanding a higher offer and encouraging shareholders to bombard the board with letters.
This bundled transaction is expected to close in mid-2026. It will require approval from a majority of the outstanding shares. The chairman owns 25% and management controls another 5%, so they still need ~30% of the remaining shareholders to sign off. At the current valuation, that will be a very tough sell, especially with two activists already making noise. It is also worth noting that Mario Gabelli filed a 13D last month with a 5% stake. While he has not commented on the deal so far, he is already sitting on a substantial quick profit as his average cost was $17/share. Still, it is hard to imagine Gabelli approving the transaction on these terms. Rangeley Capital owns about 1% of GDEN. Everbay Capital has not disclosed its stake. Two passive investors, BlackRock and Vanguard, own a combined 19% and will follow the proxy firms’ recommendations. Again, it’s hard to imagine the proxy firms supporting the privatization at the current price.
One intriguing detail that caught my eye is the size of chairman’s financing commitment. It stands at $135m, which is far above the roughly $55m he actually needs to cash out the other shareholders. If he used the full commitment, the offer could move from $2.75/share to $6.5/share (assuming $5m would go to transaction fees). That would put total consideration at $34/share – 15% above current levels. Given how deliberately engineered this entire transaction has been, and how conspicuously low the initial bid is, it would not be surprising if the chairman was planning for a price bump from day one.
The only scenario in which you could lose money here is if management cancelled both the privatization and the sale-leaseback. That seems very unlikely. The chairman and management own substantial stakes in GDEN, and they have been working toward a real estate transaction to unlock value for quite a while. It is hard to imagine the chairman abandoning the sale-leaseback just because shareholders refused to let him take the remaining business on the cheap. A much more likely outcome is that even if he refuses to raise the offer and the privatization collapses, management would still push ahead with the real estate deal. And in that scenario, GDEN’s share price would likely go up immediately.
Other notes
- There is also a go-shop period until December 5. The activists are not expecting much from it, since management has every incentive to make things difficult for any competing bidder. Still, if a higher offer does surface, it will make it even harder for management to push the current deal through.
- Both GDEN and VICI pay quarterly dividends. The next payments are scheduled for January and April. VICI’s dividend is a bit higher at $0.45/quarter versus $0.25/quarter for GDEN. This creates a tiny drag of 0.5%-1% on the total return.
- While it has not been explicitly stated what will happen to the one remaining casino that VICI is not acquiring, or to the 72 taverns, my understanding is that they will stay in RemainCo. It is also unclear what happens to the excess land and whether VICI is buying it as well or not.
As always – a great idea with a well balanced argument. Any sense as to the size of activist ownership and/or their commitment to the fight to get to a more fair price.
Rangeley Capital (“Rangeley”, “we”) owns ~1% of the outstanding shares of Golden Entertainment (“Golden”).
Have you tracked similar situations from the past where the gap between the management offer and the activists’ price targets was so wide and did these situations work out favorably on average? From the recent past WOW and STAA come to mind but those did not produce a successful outcome.
Are the taverns on GDEN-owned real estate or are they paying rents to third-parties as well?
All 72 of GDEN’s tavern locations are leased with 5–20-year terms. See page 23 of the 2024 10-K.
Mostly likely I am just over-worrying, but just in case, please confirm whether the taverns’ rent expenses have also been deducted from the $60m EBITDA.
Building rent is included in SG&A, so it should be reflected in EBITDA as well. I am not entirely sure about the finance leases, but that is a tiny liability ($2.6m as of September), and only a fraction of that probably relates to the taverns.
How are people thinking about/ structuring this? Long GDEN and short VICI vs. long-only GDEN.
VICI stock is most of the total consideration. If the offer doesn’t get raised quickly and VICI sells off, the whole trade can derailed. This is one of those cases where it’s definitely better to hedge.
If the deal doesn’t go through you can lose on both legs of the trade and the downside can be hard to estimate.
what is immediate downside if there is no deal? where should the stock stabilize with no deal within few weeks from collapse? thx
See the last paragraph in the write-up:
I think the downside in this scenario (sale of real estate, but no sale of the operating business) would be minimal, though there might be some short-term volatility.
It VICI stock continues to slide, can the deal be derailed because of lack of GDEN shareholder support?
Is the decline in VICI stock price since September an industry-wide thing or company specific?
The VICI stock price decline seems to have been driven by broader weakness across Las Vegas casino operators and tenants, such as CZR and MGM. The closest public comp, GLPI, is down similarly to VICI, also in the teens, since mid-September.
Since the transaction announcement, the move in VICI’s share price has been relatively marginal at 6%, I do not think such a move could have any impact on the sale of real estate assets.
You mentioned that there is a go-shop but activists are not expecting a higher bid to materialize during the go-shop. If there is a third party who is willing to come over the top for GDEN, wouldn’t they come in during the go-shop? If not, there would be a higher breakup fee and a higher hurdle for GDEN’s board to to declare the bid as superior. Seems that if no higher bid materializes by go-shop expiration (tomorrow, 12/5), the odds of a higher bid decreases pretty steeply. Do u disagree? And if there is no higher bid for GDEN during the go-shop, the 2.9% premium that GDEN is trading above VICI’s exchange ratio plus cash, and incl. long/short dividends, would quickly evaporate to a discount. So it seems your 15% upside thesis is highly dependent on a favorable outcome during go-shop… no?
The thesis here is not about the go-shop or competing bids for the currently proposed transaction. Rather it is about:
– splitting the current transaction into two separate parts, so that shareholders can vote on both separately – in this case it is likely that the real estate sale would be approved, whereas sale of the operating business would be rejected.
– pushing management to improve the offer for the operating business.
GDEN released proxy and it provides some background on the strategic review process. Key takeaways:
– During the strategic review process in 2024-2025, four interested parties emerged (including VICI), with three parties submitting bids for GDEN’s real estate business. No offers for the OpCo were received other than management’s bid.
– VICI’s bid for the real estate assets was raised multiple times from $1bn-$1.06bn in April 2025 to $1.16bn in September. Party A’s final bid came in slightly lower at $1.1bn.
– The special committee, formed in September 2025, concluded rather quickly (in less than two months) that the standalone public OpCo would be unattractive due to limited size and liquidity, and accepted the offer from management. The CEO’s bid was raised twice, albeit minimally, with total consideration increasing from $28.25/share to $29.25/share and finally to $30/share.
From the proxy it is not really clear how well the OpCo was shopped and the tiny bumps in CEO’s bid seem to have been done just for the better optics. I continue to think that activist pressure will result in much more significant OpCo price bump from the management consortium.
What do proxy advisory firms say about the go-private transaction of GDEN? Will they vote in favor of GDEN chair and management or vote it down?
It is too early for formal recommendations, but a “Vote Against” is highly probable.
Also, running through the numbers: 2.75 (go-private price/share) *5.5 (suggested EBITDA multiple by Everbay Capital) = 15.125. But write up says that this number should be 12$/share. Could someone explain this please?
It should be EBITDA, not the privatization price, that you apply the multiple to.
The spread has gone positive…almost attractive without a bump?
Caveats:
I haven’t looked at the dividend impact. I guess you might be on the hook for two more VICI dividends (assuming close in late June). Writeup above mentions 1% drag on spread (writeup doesn’t seem to worry about a June payment).
GDEN has a ridiculously wide Bid/offer. Makes it difficult to execute.
I didn’t include the June dividends. The whole thing should be resolved before then, but even if it isn’t, the impact on the trade will be minimal.
By the way, Gamco increased its stake in GDEN from 5.06% to 6.14% this month.
https://www.bamsec.com/filing/80724925000180?cik=1071255
Spread is wider today. I Just added a bit at a spread a little north of 8% annualized (not adjusted for dividends). Merger spreads are pretty tight at the moment. This one is attractive even without a payout boost, IMO.
Earnings are out. Nothing major really. Management will not face analyst Q&A, offer remains cheap.
Q4 2025 revenues were $155.6m with Adjusted EBITDA of $33.5m. Full year 2025 revenues were $634.9m with Adjusted EBITDA of $140.0m. Subtracting the $87m VICI rent expense from FY25 Adjusted EBITDA implies the operating business generated $53m in EBITDA. At the proposed $2.75/share privatization price (~$75m valuation), the multiple is roughly 1.4x trailing EBITDA.
“The Sale Transaction, which is expected to close in mid 2026, is subject to customary closing conditions, including the receipt of regulatory approvals and approval by a majority of Golden shareholders.”
S-4 filed. The GDEN vote is on March 31.
https://www.sec.gov/Archives/edgar/data/1705696/000110465926023474/tm2532529-3_s4a.htm#tDIV
how to vote so that investors can benefit from the given thesis?
To consider and vote on the proposal to adopt that certain Master Transaction Agreement, dated as of November 6, 2025, (as it has been or may be amended, supplemented or modified from time to time, the “Master Transaction Agreement”), by and among Golden, Argento, LLC, a Nevada limited liability company (“OpCo Buyer”), VICI Properties Inc., a Maryland corporation (“VICI” or “PropCo Buyer”) and VICI ROYAL MERGER SUB LLC, a Delaware limited liability company and a wholly owned subsidiary of PropCo Buyer (“PropCo Merger Sub”) and the transactions contemplated thereby or therein (the “Transaction Proposal”)
Board of Directors Recommended Vote: For
2.
To consider and vote on the proposal to approve, on a non binding, advisory basis, the compensation that may be paid or become payable by Golden to its named executive officers in connection with the transactions contemplated by the Master Transaction Agreement (the “Advisory Compensation Proposal”);
Board of Directors Recommended Vote: For
3.
To consider and vote on a proposal to approve one or more adjournments of the Special Meeting, from time to time, to a later date or dates to solicit additional proxies if there are insufficient votes to adopt the Transaction Proposal at the time of the Special Meeting (the “Adjournment Proposal”).
Board of Directors Recommended Vote: For
I voted against everything. I read the proxy statement and thought the sale process extremely flawed or potentially rigged and harmful to shareholder interests.
It started from Santander advising Golden’s board on exploring strategic alternatives and then switching to advising the CEO on his buyout, creating a significant conflict of interest. The price proposed by the CEO was accepted immediately by the independent committee without even looking at comps or doing any valuation work. No standalone opco valuation was ever performed by anyone. No proforma opco financials are disclosed anywhere in the proxy, among other disclosure violations.
Sartini is paying $72.6M + up to $4M debt – $40M compensation at closing = $36.6M for a business with 2026E EBITDA of $154M less $87M rent = $67M (0.55x). Plus he gets non-cash flow producing vacant land for free.
Sartini personally receives roughly $40M in combined golden parachute and accelerated equity compensation, compared to the $72M check he will have to write to minority shareholders. New equity grants to the CEO and management were made as late as February 27, 2026, just a month before the shareholder vote, knowing that they would vest and get paid out on closing.
No market check was done on the opco. No alternative buyers were given a realistic chance to buy the opco other than the CEO. The CEO had many months to prepare his bid but they rushed a limited short go-shop and imposed huge termination fees in case anyone were to make a bid. We don’t know who they contacted but apparently nobody was interested at 1x EBITDA. Why? Possibly because the propco+opco transactions were tied together and a potential opco bidder would have had to put together a bid for propco also – an almost impossible standard. Bundling was the key.
25% of termination fees would go to the CEO and 75% to VICI while the CEO buyout value is $72M vs. VICI buyout value of $1.16B. CEO’s portion looks inflated to me to prevent outside interest. Also, Golden’s termination fee is $37M while Sartini’s is only $10M – a notable assymmetry.
Party A had proposed a transaction that would have given public shareholders 95% of the opco. The proxy doesn’t explain why this proposal was rejected in favor of Sartini buying opco.
Even the propco sale was flawed as two key decision-makers on the independent committee owned shares in VICI at the time they decided to sell propco to VICI. The committee chair Chien spent 6 years as CFO at MGM Growth Properties LLC until acquired by VICI in 2022. No share amounts are disclosed in the proxy for either Chien or Lipparelli, it’s just brushed off as “immaterial”.
Macquarie, the GDEN CFO’s ex-firm was given the task to rubber-stamp the fairness opinion in exchange for millions in fees. Macquarie only valued the propco+opco transaction on a combined basis, never looking at the opco separately. The GDEN independent committee stated that no liquidation value or net book value was considered in their valuations, only projections. Then what valuation was assigned to vacant land that the CEO bought? Zero. Sold for free. Because it has a liquidation value but no projections.
Very importantly there is also no majority of the minority vote.
“Furthermore, in connection with entering into the Master Transaction Agreement, on November 6, 2025, VICI, Mr. Sartini and OpCo Buyer entered into the Exclusivity Agreement, pursuant to which VICI, OpCo Buyer and Mr. Sartini have agreed not to pursue certain prohibited transactions relating to Golden’s business and assets starting on the Effective Time and ending upon the date that is one year after the termination of the Master Transaction Agreement, subject to certain exceptions.”
If I understand correctly this means if somehow the vote fails to pass, Golden can’t do the deal with VICI using any other opco buyer for a year and Sartini can’t team up with another propco buyer for a year but they are allowed to come back together with a revised proposal. This means that Golden could never have gone ahead with just the VICI deal without Sartini.
100% agree that this is a rigged process (implies a way too cheap price also), voting against as well. I seriously doubt we’ll get a higher offer but the limited downside is still appealing.
GDEN 0.25 dividend ex-date is 3/18. VICI 0.45 dividend ex-date is 3/19. Curious if anyone is planning to do anything with a position around these dates?
What do you suggest? Temporarily closing the short to avoid the VICI div would be quite risky.
I agree that it would be foolish to unwind only one side of the trade. I have been thinking about whether it makes sense to temporarily unwind the whole position. It seems that we should expect the spread to compress 20 cents on the 19th? (All else being equal)
I usually only trade cash deals. I was just wondering how others think about dividends in this type of arb.
VICI just announced another acquisition, $144mm USD for a Canadian casino. Believe the GDEN vote is tomorrow. Anyone still hoping for a bump?
GDEN vote passed overwhelmingly, 20mm to 200k. No bump coming. Spread is still reasonable on its own, I guess. Ho hum.
It’s quite surprising how few shares were voted against the deal. It looks like minority holders chose to accept a small premium rather than risk ending up with nothing. Not sure why the activists just went quiet on this one. In any case, the trade is roughly breakeven for now, with a ~3% spread remaining and closing expected in Q2. I’m taking this one off the active list.
Is this a sell or hold until after transaction?
8k released today. Closing April 30.