The Stars Group, Eldorado Form 20-Year Online Sports Betting Pact

When states got the green light to go ahead and legalize online poker several years ago, we were all anticipating the PokerStars behemoth rolling across the United States. That hasn’t happened, mainly because only three states have launched online poker/online casino gaming industries so far and only one – New Jersey – is large enough to sustain any sort of competition. But finally the groundwork is being laid for Stars to spread some branches around the States, as The Stars Group (TSG) has announced the signing of a 20-year online sports betting deal with Eldorado Resorts, Inc. with the possibility of online gaming and poker, as well.

“We are excited to announce this agreement with Eldorado, one of the fastest growing regional gaming companies in the United States,” said The Stars Group Chief Executive Officer Rafi Ashkenazi in a press release Monday. “This agreement establishes the foundation for our U.S. strategy as we tactically pursue access to other key states and opportunities with potential media partners.”

The Stars Group and Eldorado have different ways of wording the intricacies of the deal. From The Stars Group:

The agreement grants The Stars Group the option to own, operate and brand real-money online sports betting, poker and casino offerings in each of the applicable states subject to license availability, state law and regulatory approvals. As it relates to sports betting, The Stars Group’s options will provide first skin access in states where Eldorado owns or operates more than one casino property and second skin access in all other applicable states.

Eldorado says that it “….will provide TSG with options to obtain access to Eldorado’s second skins for online sports wagering. In addition, TSG will have an option to access its third skin to operate real money online gaming and poker operations in the United States.”

What The Stars Group Gets

First skin, second skin, third skin, it’s a little confusing. Let’s put the puzzle together. One missing piece, though, is that The Stars Group isn’t the only gaming partner of Eldorado’s. In September, Eldorado entered into an agreement with William Hill in which William Hill will operate sportsbooks at Eldorado’s land-based casinos. William Hill gave its blessing for the partnership with The Stars Group and will actually share in some of the revenue stream from the Eldorado/Stars deal.

So knowing that, here is how the whole “skin” thing will work, if I am interpreting everything correctly. William Hill will have priority for the first online sports betting skin in every state in which Eldorado operates. If Eldorado only has one property in a state – Indiana, for example – that sports betting skin automatically goes to William Hill.

In any state with more than one Eldorado-owned property, The Stars Group gets dibs on the second sports betting skin, using Eldorado’s gaming license to operate the site. If there is a third sports betting skin to be had in a state, that skin then goes to William Hill.

Though the partnership is primarily about online sports betting, it also looks like that if a third Eldorado skin in a state is going to be for online casino games and/or online poker, The Stars Group will have the option to operate it.

Gary Carano, Chairman and Chief Executive Officer of Eldorado, said of the union, “The Stars Group is one of the world’s largest, most licensed and most geographically and product diverse publicly listed online gaming companies. We are excited to work with The Stars Group to capitalize on their proven ability to leverage their products to gain share in the growing market for online gaming.”

What Eldorado Gets

As for the financials, The Stars Group will give Eldorado a $25 million equity share in its company with another $5 million in equity possible. After five years, even more equity may be handed over, based on how much money The Stars Group makes in the partnership. The shares will have a price point of $23.22. Eldorado will also take a portion of the revenue The Stars Group makes with the Eldorado gaming license. In summary, Eldorado gets a share of The Stars Group’s revenue stream and an equity stake in the company.

Eldorado has been on a deal-making tear lately. In addition to the William Hill and The Stars Group agreements, it closed on the purchase of Tropicana Entertainment in October, an acquisition valued at $1.85 billion. The purchase added seven new properties to Eldorado’s portfolio and two new markets: Indiana and New Jersey.

In all, the deal between Eldorado and The Stars Group covers eleven of the thirteen states in which Eldorado has properties: Colorado, Florida, Illinois, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nevada, Ohio, and West Virginia. In the two other states, New Jersey and Pennsylvania, The Stars Group already has an online gaming presence (though Pennsylvania’s internet gambling industry has yet to actually launch). It is partnered with the Resort Casino Hotel in Atlantic City and Mount Airy Casino in Pennsylvania.

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