Escalante Secure Control of Virtual Gaming Worlds in $3.2B Deal.

Australian entrepreneur Laurence Escalante, founder of Virtual Gaming Worlds (VGW), is making a move to consolidate his ownership of the online gambling enterprise.

He is seeking to buy out smaller investors in a deal that values the company at a remarkable USD$3.2 billion (AUD$4.9 billion).

Escalante, who already holds a 70% stake in VGW, has built substantial wealth by leveraging a specific regulatory approach in the United States, allowing VGW to offer poker machine-style gaming experiences to millions of Americans through popular brands like Chumba Casino, Luckyland Slots, and Global Poker.

This move reflects a key trend in the digital gaming market: founders consolidating control amidst rapid growth and evolving industry landscapes.

VGW’s success in capturing market share from traditional operators showcase its innovative business model, which operates within the sweepstakes casino framework in the US.

However, despite its impressive growth, VGW faces mounting regulatory scrutiny in the US, with several states considering new rules that could impact its operations. This regulatory pressure is a significant factor influencing the company’s financial outlook and strategic decisions.

VGW announced that Escalante’s family office, Lance East Office, proposed a buyout offer of USD$5.05 (AUD$7.75) per share to acquire the remaining shares through a special purpose vehicle.

The board has recommended shareholders accept this deal, which requires approval from all shareholders except Escalante and his related entities.

This improved offer, reportedly about three times the company’s earnings from the last financial year, followed an initial lower offer that was rejected by an independent board committee formed to oversee the process, including Mike Symons from Canterbury Partners.

The company’s rapid growth has been substantial, reporting a 27% increase in revenue, amounting to USD$6.13 billion (AUD$9.44 billion) for the 12 months ending June 30, with profits escalating from USD$377.6 million (AUD$581.3 million) to USD$491.6 million (AUD$757.1 million) in the same period.

In anticipation of continued regulatory pressures, VGW expects weaker earnings in the second half of the current financial year, forecasting a decline of 10% to 15% compared to the first half, and plans to exit the New York market in June.