Golden Entertainment (GDEN) — Expected Higher Offer — 15%+ Upside
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.