Accel Entertainment (ACEL) Acquires Fairmount Holdings

Accel Entertainment, Inc. (NYSE: ACEL) and Fairmount Holdings, Inc. today announced that the companies have entered into an agreement for Accel to acquire Fairmount, the owner of FanDuel Sportsbook & Horse Racing, for total consideration of approximately $35 million (based on a 20-day trailing average), payable to the sellers as 3.45 million shares of Accel Class A-1 common stock. The strategic transaction adds a promising single-site racetrack and future casino to extend Accel’s convenience gaming expertise to a larger and more concentrated venue – an adjacency in Local Gaming that is complementary to Accel’s steadily growing, route-based footprint.

During the year ended December 31, 2023, Fairmount generated $29 million of revenue and modest Adjusted EBITDA. Accel plans to invest $85 - $95 million (over and above the purchase price) to fund temporary and then permanent casino construction and modest track investments. Accel’s five-year forecast suggests an Adjusted EBITDA potential of $20 to $25 million and over 75% free cash flow conversion1 – pointing to a compelling cash flow return on capital. The asset will be the cornerstone in a local gaming platform that builds on Accel’s capabilities and strengths as a leading route-based operator.

“As a leading distributed gaming operator in the United States, we are excited to partner with ‘Hall of Fame’ value creators Bill Stiritz and Rob Vitale to deploy our local gaming expertise in this promising sportsbook, racetrack and future casino,” said Andy Rubenstein, Accel co-founder, President, CEO and Director. “We’re also deeply grateful to Mayor Jeff Stehman of Collinsville, state representatives Jay Hoffman (113th District) and Katie Stuart (112th District), state senator Chris Belt (57th District), the Illinois Gaming Board and the Illinois Racing Board for their support of this opportunity to reinvest and support job creation in the southern Illinois and greater St. Louis community,” Rubenstein continued. “We are excited to be a part of an almost 100-year-old southern Illinois institution in Fairmount Park and support the Illinois agriculture and equine industries.”

"I am delighted by Accel Entertainment's purchase of FanDuel Sportsbook & Horse Racing. This move is a testament to the vitality and potential of Collinsville. It will undoubtedly spur economic development along the Collinsville road corridor, creating jobs and bolstering our local economy. We look forward to the positive impact this acquisition will have on our city,” stated Mayor Jeff Stehman of Collinsville, IL.

“We couldn’t have found better partners than Andy and his team in this transaction, and we look forward to staying fully aligned on this journey as significant equity owners from here,” noted William Stiritz. “We’ve long sought strategically aligned, well capitalized and proven operators in the local gaming space to realize the full potential of this sportsbook and racetrack, and Accel is the ideal fit,” said Rob Vitale, current CEO and Chairman of Post Holdings.

Compelling Strategic Rationale

• Natural Adjacency
  • Accel’s organic and tuck-in M&A growth model has been proven over 14 years, scaling route-based gaming in Illinois, Montana, Nevada, Nebraska and Georgia
  • Accel has built a deep expertise in player experience, service and cash logistics, commercial partnerships, regulatory relationships and procurement
  • The acquisition of FanDuel Sportsbook & Horse Racing extends route-based capabilities to a convenient single site for locals
• Attractive Return Profile
  • The transaction has two parts – acquisition of Fairmount, the holder of the license and owner of the underlying site assets, for approximately $35 million of equity consideration, and $85 - $95 million of expected casino build-out and track investments funded from Accel’s credit facility
  • Projections of five year Adjusted EBITDA and robust free cash flow conversion point to an attractive return on capital – in-line with Accel’s existing route-based footprint
• Platform for Future Growth
  • This transaction accesses a ‘local gaming’ total addressable market (“TAM”) estimated to be approximately $15 billion in size – or more than twice our existing route-based TAM
  • Local gaming assets remain largely unconsolidated, under family or small business ownership, and far less often contested by larger gaming players

Financial Highlights

The all-equity offer for Fairmount of 3.45 million shares of Accel Class A-1 common stock represents a total enterprise value of approximately $35 million, based on a trailing 20-day average. Accel expects the acquisition to accelerate its long-term financial model with high return growth at accretive margins. Upfront buildout costs will be funded from Accel’s existing revolver facility.

Transaction Structure and Timing

Accel will purchase Fairmount through the issuance of new shares of Accel Class A-1 common stock.

The closing of the transaction is subject to customary closing conditions and customary approvals from the Illinois Racing Board and the Illinois Gaming Board. Closing is expected in the fourth quarter of 2024. The transaction has been approved by Accel’s Board of Directors and the Board of Directors and shareholders of Fairmount Holdings. Wells Fargo acted as exclusive financial advisor and Lewis Rice LLC acted as legal counsel to Fairmount Holdings in connection with the transaction. McDermott Will & Emery LLP acted as legal counsel to Accel Entertainment in the transaction.

Conference Call

Accel will host an investor conference call on July 15, 2024 at 4:30 p.m. Central time (5:30 p.m. Eastern time) to discuss this transaction. Interested parties may join the live webcast by registering at https://www.netroadshow.com/events/login?show=0502ffe0&confId=68474 or accessing the webcast via the company’s investor relations website: ir.accelentertainment.com. Following completion of the call, a replay of the webcast will be posted on Accel’s investor relations website.

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