Las Vegas Sands (NYSE: LVS) didn't make a big play for regional gaming dollars, but the one it did looks like it'll turn out to be very profitable. The company announced Thursday that it will sell Sands Bethlehem in Pennsylvania to Wind Creek Hospitality for $1.3 billion.
The resort cost over $800 million to build and has been spitting off over $100 million in adjusted EBITDA for years. But it was never a core property for Las Vegas Sands, and the cash can be used better elsewhere.
Wind Creek Hospitality is owned by the Poarch Band of Creek Indians of Alabama, which also owns three casinos in Alabama and stakes in others across North America. Assuming the deal goes through, it will be the company's first foray into the northeastern part of the country.
The $1.3 billion price tag is only 8.8 times the $147 million in adjusted property EBITDA Sands Bethlehem generated in 2017. This compares to Las Vegas Sands' overall enterprise value to EBITDA value of 13.2, so it's definitely selling at a discount to the rest of the company.
It was reported in 2017 that MGM Resorts (NYSE: MGM) was in talks to by Sands Bethlehem, but the deal never went through. That's a little surprising given MGM's growing presence on the East Coast, but it may have put a priority on the Washington D.C. and Massachusetts market, where it already had gaming licenses.
Why is Las Vegas Sands divesting casinos today?
The somewhat confusing part of the deal is that Las Vegas Sands has no great reason for divesting the Sands Bethlehem asset. It only has $9.64 billion in debt compared to $4.9 billion in adjusted EBITDA generated last year, a very low amount of leverage for the gaming industry.
There's also no clear use for the cash today. Las Vegas Sands doesn't have any growth projects in the pipeline in the U.S. or internationally. It's a leading contender for a resort in Japan, but no license has been awarded, and there's no guarantee Las Vegas Sands would be one of the winners.
Las Vegas Sands must just not be bullish on the Pennsylvania gaming market any longer, or there wouldn't be a reason to sell Sands Bethlehem today.
A lot of money, but not a game changer
An infusion of $1.3 billion of cash is a lot for most companies, but it doesn't move the needle much for Las Vegas Sands. In fact, selling Sands Bethlehem for a significantly lower valuation than where the company overall trades for could make the stock look more expensive to investors.
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