Empire Resorts has signed a partnership deal with UK-based online gaming giant bet365.
The deal will lead to the two setting up online and live sports betting at the Resorts World Catskills casino in New York state.
Sports betting has not yet started in New York, but the enabling law is on the books and the casinos are getting ready to go.
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The partnership is a “strategic alliance” that involves substantial new investment.
As an indication of the long-term commitment, bet365 will buy up to $50 million of Empire Resorts shares in two tranches. The price of $20 a share is a substantial premium to the current price of $12.48.
Following the share purchase, bet365 will be Empire’s second largest shareholder. Empire’s largest shareholder is Kien Huat Realty III, Ltd. (“Kien Huat”).
As part of the deal, Kien Huat will buy up to $126 million of convertible preferred stock. Not only is this a vote of confidence in the potential for New York sports betting, it means that the project will be well funded from the start.
After start-up costs are recouped, Empire Resorts and bet365 will split profits 50/50.
New York has the sports betting laws on its books but no regulations
Four casinos in New York are authorized to operate sports books, including Resorts World.
- The Del Lago casino is partnered with DraftKings
- Tioga Downs has a deal with FanDuel
- The Rivers Casino is partnered with Kambi
None of them can currently offer sports betting. The current hold-up is not a legal problem, it is simply that the regulator has issued no regulations.
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The Supreme Court overturned the Professional and Amateur Sports Protection Act of 1992 (PASPA) back in May. This triggered the New York law into effect.
The New York State Gaming Commission is responsible for producing the gaming regulations. Shortly after the Supreme Court decision, Acting Executive Director Ron Ochyrm said:
“Commission staff has long been working on regulations that would effectuate sports gambling under the existing statutory language. Staff anticipates being able to provide a draft for your review in the near term.”
That was in May this year. It is now November, so the “near term” is rapidly becoming the medium term.
Regulations should be published before the end of the year, but the first sports betting will not take place until 60 days after publication.
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New York casinos are hemorrhaging money
In July, the Del Lago casino asked the state for a bailout.
New York casinos pay 37 percent of table revenue and 10 percent of slots revenue in gaming taxes. The details of Del Lago’s request are not public, but the casino probably asked for some tax protection to help it survive.
In 2017, revenues came in at $147 million, almost half of what the casino originally forecast in its license application.
Empire Resorts projected $277 million in first-year revenue in its application. Earnings for the first half of 2018 were only $82 million.
The other casinos are also producing much less than they forecast. Sports betting revenues probably won’t make up the gap, but it will help.
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This is one reason why the casinos are anxiously awaiting the sports betting regs. They need to start generating those extra sports betting revenues.
Resorts World has a problem
One problem sports betting won’t solve is competition.
The four commercial casinos have to compete against local tribal casinos. And now that New Jersey has authorized sports betting, they have competition from across the state border.
The Meadowlands racetrack is just 19 miles down the I-95 from Manhattan. The Resorts World Catskills is 88.5 miles away.
In August, an Empire Resorts company statement read:
“We cannot be certain that our business will generate sufficient cash flow from operations, that our anticipated earnings from the Casino will be realized, or that future borrowings will be available under our existing debt arrangements or otherwise to enable us to service our indebtedness or to make anticipated capital expenditures. As a result, we may need to raise additional capital or incur additional indebtedness, including from our largest stockholder or by issuing securities ….”
bet365 is part of the solution
In the light of Empire Resorts financial situation, bet365 is a fantastic partner to have.
The company has already established a toehold in the US market through a partnership deal with the Hard Rock Atlantic City.
Executive Chairman of Empire Resorts Manny Pearlman said:
“bet365’s global expertise in effectively developing and executing world-class sportsbooks strongly complements Empire’s leadership in commercial casino operations in New York. This collaboration, which will enable Resorts World Catskills to be a leading destination for sports wagering in New York State, highlights our commitment to the continued growth of Resorts World Catskills, as well as our dedication to working with the best, most innovative pioneers in the industry to provide world-class gaming options.”
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Of course, as the fourth most populous state in the US, New York makes a great market for bet365.
Online sports betting outside the casinos is not yet legal, but if New York ever does get legislation passed, bet365 is ready.