Bally and Element in a $100 Million Bidding War for the World Poker Tour

Any new enterprise needs around three to five years to become established, pay back its initial setup costs and begin to turn a profit.

When Allied Esports Entertainment (AEE) first opened its doors in 2017 no one could have foreseen that their third year in business would be the year that the world would face a global pandemic.

 Wrong Time, Wrong Direction

While shopping, gambling, and even basic services like ordering a meal from your favourite restaurant were all growing in online popularity, the esports industry was surprisingly moving in the opposite direction, with avid gaming fans packing out huge stadiums to watch their favourite teams battle it out on massive overhead screens.

With the new reality created by the pandemic global digitalisation and online business boomed while Allied Esports Entertainment suffered a crippling blow as it was unable to meet the needs of its consumers due to lockdowns and other restrictions on public gatherings.

This saw the fledgeling company announce a $15.5 million loss for 2019, followed by a shocking loss of $46.5 million for the 2020 fiscal year. According to their official press release, this increased loss is based on “impairment of investments and property and equipment, stock-based compensation expense and G&A expenses”.

Ray of Hope for AEE

Despite the dire state of AEE during what can only be described as a time of unprecedented hardship, the company does have one shining star among its stable of products, the World Poker Tour (WPT).

Unlike esports which had evolved into a land-based behemoth, online gambling has flourished during the past two years. Even with the restrictions placed on in-person gatherings, online poker tournaments have always drawn fantastic participation, and the WPT posted a nominal $1.5 million profit in 2020.

While not enough to directly impact AEE’s negative PNL for the last 24 months, it was enough to draw the attention of both gambling giant Bally Entertainment and privately-held investment vehicle Element Partners, who have subsequently gone to war in its name. A bidding war that is.

 Let the Games Begin

Element Partners were the first part to show an interest in AEE, offering to purchase the World Poker Tour and all related poker assets for a healthy $78.3 million. However, Bally soon made a counteroffer of $100 million for AEE in its totality.

Given the current financial state of AEE, this was initially deemed a viable offer, that is until Element increased their bid to $90.5 million in cash, limiting their interest to the company’s poker assets.

Not to be outdone by a private company Bally has since increased its bid to $105 million, and to increase its superiority excluded its interest in AEE’s esports assets from the bid.

Allied Esports Entertainment CEO, Frank Ng, believes this cash injection combined with their own internal initiatives will put the company in a strong position for the coming year, saying:

“We are optimistic that we will soon be operating in an environment where the Company's foundational strides made on the Multiplatform Content pillar of our business in 2020 will come together alongside the resurgence of live events and the return of maximum capacity at our various Esports venues.”

The will they will not they dance is not quite settled yet as Element has submitted an undisclosed counteroffer, which has been noted as ensuring that the Bally offer is “no long superior”.

The WPT purchase is expected to be finalised by the end of April 2021, however, there is still the chance that Bally and Element can get in a few more rounds of counter proposals before the final bell is rung.