In one of the more surprising esports deals of recent times, Allied Esports Entertainment has agreed to sell all its poker-related business and assets to Element Partners. The deal includes all entities part of the famous World Poker Tour.
The terms of the agreement revealed that Allied Esports agreed a deal with Element Partners for $78.25 million. $68.25 million of that is an up-front payment, while there is also a fully guaranteed 5% revenue share of WPT-branded tournament entry fees (n Element-owned or licensed platforms), up to a maximum of $10m.
This 5% revenue share is payable over three years once the deal has been completed.
Approval from Directors
The deal has already received a thumbs up from Allied Esports board of directors and assuming that the shareholders in the company also approve the sale, and subject to regulatory approval and other conditions regarding closing the deal, the sale should go through in late January or early February 2021.
Speaking about the deal, the CEO of Allied Esports Entertainment Frank Ng commented:
“Despite the many challenges caused by the Covid-19 pandemic, the WPT business has delivered substantial, impactful results, specifically through its online platforms and services, and has made meaningful contributions for the company.”
“Due to Covid-19’s impact on the Company’s overall revenue generation and profitability timeline, we believe the forthcoming sale of the WPT business will garner significant capital and an avenue to determine new opportunities that will deliver accelerated returns for our stakeholders.”
Adam Pliska, the CEO of the World Poker Tour, expressed his thanks to Allied Esports Entertainment when stating:
“I want to thank Frank Ng and the entire AESE management team for its support in allowing WPT to flourish during this period. My management team and I are excited about this next chapter and the tremendous new opportunities for the WPT brand and business.”
Stellar Year of Business for WPT
The sale is perhaps surprising given how profitable and successful the WPT has been throughout 2020. Registrations online for ClubWPT increased 61% up to the third quarter of 2020 and subscription revenue was also up by 56%.
It’s WPT World Online Championships also featured a massive $100m prize pool. Furthermore, viewership of WPT events was also vastly increased, OTT household viewership up 368% and linear household viewership up 77%.
It does seem that with revenue down in other areas of the business, as though Allied Esports Entertainment have sacrificed their profitable WPT business to make up the funding that was lacking throughout 2020 in those other sectors.
New Ventures Ahead for Allied Esports Entertainment?
Alongside its flagship venue, the HyperX Esports Arena Las Vegas, its fleet of mobile esports trucks (the HyperX Esports Trucks) and the HyperX Esports Studio, Allied Esports Entertainment has also invested heavily in the esports industry.
However, even that could be up for grabs as the Allied board has also announced that in addition to exploring additional strategic options for the esports side of the business, it is also considering cashing in on esports growing popularity by potentially selling this arm of the business too.
Lake Street Capital Markets have been engaged to assist with the process, although as yet no potential buyer is believed to have expressed an interest.
The company has also stated that if its WPT sale and esports business sale goes ahead, it would operate in future under a new name as a publicly-traded holding company. It would use the cash resources generated from those sales to explore other avenues for investment in the online entertainment industry and gaming business sectors.
Is this firesale indicative of worrying financial issues at the company, or is it simply a move to cash in on two of its main assets, while the clamour and price for them are likely to be highest? Experience suggests the latter, but esports fans will be interested to see how any potential sale of Allied’s Esports assets and businesses go.
And what that means for the varied investments the company has already made in the industry.