Last week, Boyd Gaming announced that they’d reached a deal to buy Pala Interactive, a California online gambling software and services company.
The deal is worth $170 million. Pala is largely owned by the Pala Band of Mission Indians. The group currently has business-to-business services in eight U.S. states and in Canada, and operates business-to-consumer products in New Jersey and Canada.
It has even tried its hand (without much success) in the online poker space, launching Pala Poker in New Jersey in 2017.
According to industry analysts, Pala Interactive brought in a modest $5 million in adjusted earnings last year. That figure should improve this year. And the deal itself probably won’t close until the first quarter of 2023.
These names might be unfamiliar to many online gamblers. Boyd’s more of a retail brand and its online products don’t use the company’s own name. Pala, for its part, has been almost invisible.
New Jersey online poker players will be familiar with WSOP, PartyPoker, and PokerStars, and perhaps some international brands. Pala Poker is essentially deserted, while even Pala Casino is just one minor brand among dozens.
Even so, that didn’t deter Boyd, based in Las Vegas, from snapping up the little company. As David Katz, an equities analyst with Jefferies Equities Research, told CDC Gaming Reports:
“Given the size of the transaction and marginal (adjusted earnings) contributions or capital requirement near-term, we expect a generally neutral reaction to the share.”
This could be interpreted as either a backhanded compliment, or an insider trying to downplay what may be a shrewd play for the long game. That is, this is a company which is up and coming, but still lesser known in the online space, making a tortoise-like play for much smaller, much more unremarkable gaming companies. After all, consolidation has been the name of the game in US online gambling from the start.
It’s reminiscent of the the way, say, local radio stations have been swallowed by the likes of iHeartMedia (FKA Clear Channel) or the way Sinclair Broadcast Group has become the largest owner of TV stations in the country. by quietly buying up smaller, seemingly less-attractive entities. But companies like Pala have real value—in the online world especially—because they have a real product. Products based not only on marketing or promotion. But products with real proprietary technology. Always a solid investment.
Another upside to the acquisition is that Pala has just recently been given its Ontario Gaming Related Supplier (GRS) Manufacturer License. This means Boyd will secure some B2B access to Ontario as well.
And then there exists the outside possibility that Boyd might hitch the Pala wagon to Boyd’s Stardust brand. Pala needs more players, and Boyd’s Stardust Online Casino, in New Jersey and Pennsylvania, needs a more solid platform. (Peanut butter, meet chocolate; chocolate, meet peanut butter.)
As OPR Managing Editor Alex Weldon wrote when covering the Stardust launch last year:
“In a crowded industry, one of the best ways to get ahead is to build a customer database before the real money product becomes legal.”
According to David Strow, Boyd’s vice president of corporate communications, that kind of move fits into their master plan:
“Stardust is a very well-known and popular brand. And we’ve made no secret that we want to leverage it in the digital space. It’s safe to say you will see us do that as we roll out.”
Boyd + FanDuel + Flutter + PokerStars?
If something like that does unfold, it’ll be a neat trick. After all, relaunching the Stardust brand was itself a team effort with FanDuel.
The Boyd family has held the rights to the old Vegas casino by that name since buying it in 1985. However, the casino itself was demolished in 2007. Stardust Online Casino offers games in partnership with FanDuel Sportsbook, and the two share a login, yet users of Stardust can take advantage of Boyd’s B Connected loyalty program.
The partnership is multifaceted. FanDuel also has a separate online casino under its own brand. But FanDuel Casino is geared toward people crossing over from the sportsbook (which includes a lot of blackjack players). Stardust, on the other hand, is geared more toward the pure casino user (which means a lot of slots players). FanDuel’s owner, Flutter, also owns PokerStars, which makes it an interesting question how, if at all, the Pala Poker platform is going to fit into Boyd’s plan.
Boyd seeks to control its own destiny
Boyd Gaming CEO and president Kevin Smith told CDC Gaming Reports upon acquiring Pala:
“The acquisition of Pala Interactive marks the next phase in the ongoing execution of our igaming strategy, providing us full control over the technology, development, and customer experience. By integrating online casinos with our existing land-based operations, we will be able to further leverage and monetize our expansive customer database and the amenities of our nationwide portfolio of properties, driving growth in both our land-based and igaming operations.”
“The way to look at this is that it’s about acquiring a technology and an expertise that will allow us to pursue online gaming more directly. By 2023, we’ll be directly operating our own online casino operations, to complement our other operations.”