 Jacobs Entertainment, Inc.
Proposal for Combination
October 2013
Exhibit 99.2 |
 Disclosure statement
This
presentation
has
been
prepared
by
Jacobs
Entertainment
(the
“Company”)
for
the
exclusive
use
of
the
Board
of
Directors
of
MTR
Gaming
to
whom
the
Company
delivers
this
presentation
(such
party,
together
with
its
subsidiaries
and
affiliates,
the
“Recipient”).
Although
the
Company
believes
the
information
is
accurate
in
all
material
respects,
the
Company
does
not
make
any
representation
or
warranty,
either
express
or
implied,
as
to
the
accuracy,
completeness
or
reliability
of
the
information
contained
in
this
presentation.
The
presentation
may
include
certain
forward
looking
statements
and
projections
provided
by
the
Company.
Any
such
statements
and
projections
reflect
various
estimates
and
assumptions
by
the
Company
concerning
anticipated
results.
No
representations
or
warranties
are
made
by
the
Company
as
to
the
accuracy
of
any
such
statements
or
projections.
Whether
or
not
any
such
forward
looking
statements
or
projections
are
in
fact
achieved
will
depend
upon
future
events,
some
of
which
are
not
within
the
control
of
the
Company.
Accordingly,
actual
results
may
vary
from
the
projected
results
and
such
variations
may
be
material.
Statements
contained
herein
describing
documents
and
agreements
are
summaries
only
and
such
summaries
are
qualified
in
their
entirety
by
such
documents
and
agreements.
Nothing
contained
herein
is,
or
shall
be
relied
upon
as,
a
promise
or
representation
as
to
the
past
or
future.
The
Company
expressly
disclaims
any
and
all
liability
relating
to
or
resulting
from
the
use
of
this
presentation.
In
addition,
the
information
contained
in
this
presentation
is
as
of
the
date
hereof,
and
the
Company
has
no
obligation
to
update
such
information,
including
in
the
event
that
such
information
becomes
inaccurate.
This
presentation
has
been
prepared
solely
for
informational
purposes
only.
The
Recipient
should
not
construe
the
contents
of
this
presentation
as
legal,
tax,
accounting
or
investment
advice
or
a
recommendation.
The
Recipient
should
consult
its
own
counsel
and
tax
and
financial
advisors
as
to
legal
and
related
matters
concerning
the
matters
described
herein,
and
by
accepting
this
presentation,
the
Recipient
confirms
that
it
is
not
relying
upon
the
information
contained
herein
to
make
any
decision.
This
presentation
does
not
purport
to
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all-inclusive
or
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contain
all
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information
that
the
Recipient
may
require.
This
presentation
is
non-binding
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subject
to
the
negotiation
and
execution
of
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definitive
agreement.
1 |
 Table
of contents 2
Proposed transaction summary and comparison
Market overview
Company overview and strengths
Historical financial performance |
 Proposed transaction summary and comparison |
 Jacobs
proposed transaction summary 4
Transaction
Jacobs Investments is offering to combine Jacobs Entertainment and MTR Gaming in
the same fashion as the proposed Eldorado transaction:
•
MTR and Jacobs Entertainment to contribute their respective businesses to a newly
formed public company (“Public Newco”)
•
MTR stockholders exchange outstanding shares for Public Newco and new shares to
be issued to Jacobs Investments’
shareholders
•
Transaction based on MTR share price of $5.69
•
Based on projected June 30, 2014 financial performance, the resulting pro forma
equity ownership of Public Newco will be approximately 70% for existing MTR
shareholders and the shares newly issued to Jacobs Investments will be
approximately 30%
•
The
Public
Newco
shares
issued
to
Jacobs
in
addition
to
the
MTR
shares
currently
owned
by
Jacobs
will
result
in
Jacobs
owning
approximately
43%
of
Public
Newco
MTR Per Share
Valuation
•
$5.69 per share, representing a 59% premium to the closing share
price of $3.58 on
September 6, 2013 and a 10.5% premium to the Eldorado offer.
Jacobs Valuation
•
6.81x LTM EBITDA, adjusted for non-recurring charges, to be measured at
closing Cash Offer Option
•
MTR Stockholders will have the option to elect to receive $5.69 per share in cash
for a portion of their shares versus shares in Public Newco
•
Up to $30 million of cash available to fund the cash offer option
No change in
control
•
The Jacobs Entertainment transaction will not involve a change of control; no
shareholder will own a majority of Public Newco’s shares
•
MTR will have the right to appoint the majority of Public Newco’s initial
directors Financing
•
Anticipated that all existing indebtedness to remain in place for both
companies •
No bondholder consents will be required |
 Jacobs
Entertainment is a superior merger partner for MTR Gaming 5
Jacobs Entertainment
Eldorado
Overview
Higher total consideration
$5.69 per share (10.5% premium)
Better geographic diversification and
long-term business model
sustainability
$5.15 per share
EBITDA margins
27% (casino properties only)
17%
Number of Properties
JEI’s properties are wholly owned:
5 casinos / 1 racetrack / 9 OTBs
23 video poker truck plazas
3 casinos (one of which is tied up in a
50/50 joint venture with a third party)
Number of Markets
4
2
Competitor market profile
Steady with limited competitive risk
Highly competitive with downward
risk
Positioning of properties
Locals oriented Nevada, Colorado
and Louisiana properties targeting
diverse and stable customer base
Regional Nevada properties targeting
very competitive California market
Tax benefits
No change of control;
Does not trigger NOL limitations
Transaction triggers Section 382
NOL limitations |
 Merger
of two leading regional operators MTR Gaming
Jacobs
Combined
Gaming Properties
3
38
41
Gaming machines
5,792
3,714
9,522
Table games
97
52
149
Hotel rooms
354
219
573
Employees
2,858
2,200
5,058
LTM Net Revenue
$518.6 million
$393.6 million
$912.2 million
LTM Adjusted EBITDA
$105 million
$53.2 million
$158.2 million
6 |
 Company overview and strengths |
 Company snapshot
8
Founded in 2001, Jacobs Entertainment is a geographically diversified gaming and
pari-mutuel wagering company with operations across four states in
different regions of the U.S. Assets include land-based casinos, video
gaming truck plazas, a horse racing track and satellite wagering facilities
Focus on attracting and fostering repeat business from local gaming patrons by
emphasizing slot and video game play, and by providing ample parking,
high-quality food at affordable prices and promotional incentives
Facility
Number
Land-based casino
5
Racetrack
1
Video gaming truck plaza
23
Satellite wagering facilities
9 |
 Key
Company Strengths 9
Disciplined operating and
investment model: High
margins and strong ROI
Properties in steady
regional gaming markets
Stable and experienced
management team
Stable financial
performance and
cash flows
Broad geographic
and asset diversification
Protected markets with
limited competitive threats |
 The Lodge
42%
Gilpin Casino
6%
Gold Dust
West
13%
Louisiana
Truck Plazas
37%
Colonial
Downs
2%
Broad geographic and asset diversification
Jacobs operates across four states in different regions of the U.S.
Significant asset diversification across land-based casinos, video gaming truck
plazas and a horse racing track with satellite wagering facilities
10
Note:
Property level adjusted EBITDA presented before corporate allocation and other
adjustments. (1)
Consists of 23 separate truck plaza video gaming locations.
(2)
Consists of 3 separate Gold Dust West casinos (Carson City, NV, Elko, NV and Reno,
NV). (1)
(2)
LTM 6/30/13 adjusted property level EBITDA: $62.9 million
|
 Stable financial performance and cash flows
Consistent historical performance
11
$50.4
$54.1
$56.8
$54.2
$53.0
$53.0
$54.6
$53.2
2006
2007
2008
2009
2010
2011
2012
LTM 6/30/13
Adjusted EBITDA
($ in millions)
$247.8
$279.2
$286.8
$270.6
$260.5
$264.6
$275.1
$272.7
$81.4
$96.1
$116.7
$73.4
$95.9
$119.5
$122.1
$120.9
$329.2
$375.3
$403.5
$344.0
$356.4
$384.1
$397.2
$393.6
2006
2007
2008
2009
2010
2011
2012
LTM 6/30/13
Base revenue
Fuel revenue
Net revenue
($ in millions)
Jacobs has demonstrated the ability to generate stable and consistent EBITDA,
including during the 2008 / 2009 recession
Source:
Company filings and management information.
Note:
During the above presented historical period, the Company completed several related
party acquisitions which were accounted for as combinations of entities under common control. Accordingly,
the
consolidated
financial
statements
for
2006
through
LTM
6/30/13
have
been
retroactively
adjusted
to
include
the
operations
of
these
businesses
as
if
acquired
at
the
beginning
of
the
appropriate
historical period. EBITDA adjusted for non-recurring charges.
|
 Stable financial performance and cash flows
Substantial liquidity for operations
12
74% cash flow conversion over the last 7 years
Limited working capital requirements and targeted maintenance capital
expenditures Management team has experience operating in a levered
environment Free cash flow
(1)
(1)
Adjusted EBITDA less maintenance capex.
(2)
Defined as Free cash flow / Adjusted EBITDA.
70%
75%
74%
74%
77%
73%
73%
75%
Free cash flow conversion
(2)
($ in millions)
$35.2
$40.8
$41.8
$40.2
$40.7
$38.9
$40.0
$39.7
2006
2007
2008
2009
2010
2011
2012
LTM 6/30/13 |
 Protected markets with limited competitive threats
13
Core markets are insulated from competition because of costly and lengthy
regulatory process Beyond the regulatory barriers, significant investments of
time and capital also restricts potential new entrants Gaming license
restrictions
Gaming license
restrictions
No new supply since 2001
June 2010 legislation does not allow new licenses for video poker truck plazas
within one mile of any residential property
–
Nearly eliminated the issuance of new video poker truck plaza licenses
Limited to only parishes that have approved video poker
Land availability
Scarcity of land available for development within the approved gaming
district High cost of acquiring land and constructing new gaming
facilities Truck plaza must offer diesel fuel, gasoline, a convenience store
and a restaurant Maximum of 50 video poker machines at any single
location Facility
requirements
Gaming license
restrictions
Stringent licensing requirements and substantial licensing / compliance
expenses Outlook
No increase in devices expected for at least two years
Outlook
No new competition expected in Jacobs’
regional markets: Reno, Elko and Carson City
Monopoly
The only horseracing track in Virginia
The sole operator of satellite wagering facilities in Virginia
Outlook
No new competition expected |
 Disciplined operating and investment model
High margins
14
Adjusted EBITDA margin
Source:
Public filings.
(1)1
Includes Colorado and Nevada casino assets only. |
 Jacobs general market overview |
 Colorado overview
Attractive market and regulatory dynamics
16
Overview
Approximately 40 casinos operate in the mountain towns of
Black Hawk, Central City and Cripple Creek
830,000 and ~3.1 million adults reside within a 25-mile and
50-mile radius of Black Hawk, respectively
Average annual household income within 50 miles of the
casino is ~$77,400
Regulatory environment
Under Colorado regulations, entities are limited to 3 retail /
gaming operator licenses in Colorado
–
Jacobs has 2 licenses (The Lodge and Gilpin Casino)
Effective July 2009, Colorado Amendment 50 further eased
gaming restrictions
–
Allowed for the introduction of craps and roulette
–
Increased the minimum single wager limit to $100
–
Allowed 24-hour gaming operations
–
Prohibited changes in existing tax levels (currently a series of
graduated tax rates, with maximum tax rate of 20%)
Smoking ban in casinos became effective January 2008
Competitive landscape
Population per sq mile
> 1,000
500 to 1,000
200 to 500
100 to 200
< 100 |
 Amendment 50 became effective July 2009
$453.7
$510.9
$513.0
$516.3
$527.7
$543.5
$565.6
$551.3
$498.4
$561.3
$554.3
$556.1
$556.7
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Historically, the Black Hawk gaming market has demonstrated stability of
performance through economic cycles Colorado overview
Black Hawk stable financial performance
17
Black Hawk market adjusted gross proceeds
Black Hawk market win per unit per day
($ in millions)
Source:
Colorado Division of Gaming.
Note:
Data
presented
based
upon
fiscal
year
ended
June
30
th
.
$145
$151
$149
$148
$156
$151
$153
$152
$141
$169
$176
$178
$181
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Amendment 50 became effective July 2009 |
 The
Lodge and Gilpin Casino Property overview
18
975
376
34
6
50
N/A
28,000
11,000
4 restaurants
3 bars
1 restaurant
2 bars
June 1998 (invested approximately $9 million
into property since 2004)
October 1992 (invested approximately $10
million into property since 2000)
Property
# of slot machines
Gilpin Casino
Black Hawk, CO
The Lodge
Black Hawk, CO
# of gaming tables
# of hotel rooms
Gaming square ft.
Amenities
Opening
Note:
Slot and table data as of June 30, 2013.
Jacobs
properties
are
ideally
located
in
the
middle
of
the
Black
Hawk
market
with
easy
vehicular and pedestrian access |
 17.1%
18.3%
19.8%
19.3%
18.8%
19.6%
19.5%
19.1%
14.5%
14.8%
14.6%
15.2%
15.8%
16.4%
16.5%
16.6%
2006
2007
2008
2009
2010
2011
2012
LTM 6/30/13
Market share
Fair share
The Lodge and Gilpin Casino
Jacobs Entertainment has a dominant market share in the Black Hawk Market
19
Jacobs Entertainment has continually captured more than its fair
share in the Black Hawk market
(1)
(2)
Source:
Colorado Gaming Commission and Company filings.
(1)
Market share is calculated as the gross gaming revenue for The Lodge and Gilpin
Casino as a percentage of the total revenue of the Black Hawk gaming market.
(2)
Fair
share
is
based
on
unit
count
for
The
Lodge
and
Gilpin
Casino
as
a
percentage
of
the
total
number
of
units
in
the
Black
Hawk
gaming
market.
Dominant market share driven by strong location, high quality product offering and
presence of Jacobs’
senior management |
 The
Lodge and Gilpin Casino Financial performance
20
Net revenue
$94.1
$95.0
$96.5
$98.0
$98.8
$96.8
2008
2009
2010
2011
2012
LTM
6/30/13
The Lodge
Gilpin Casino
Adjusted property EBITDA
$31.2
$32.3
$31.3
$32.3
$32.4
$30.2
2008
2009
2010
2011
2012
LTM
6/30/13
The Lodge
Gilpin Casino
($ in millions)
($ in millions)
$164
$165
$178
$183
$193
$189
2008
2009
2010
2011
2012
YTD
6/30/13
Average win per position per day (The Lodge and Gilpin)
|
 Louisiana video poker market overview
Stable market with high barriers to entry
21
Permitted in 31 of Louisiana’s 64 parishes
At June 30, 2013, Louisiana had 201 licensed video poker
truck plazas
Each video poker truck plaza features a convenience store,
fueling operations, a restaurant and up to 50 poker devices
Overview
Barriers to entry
No new licenses for video poker truck plazas granted for
locations within one mile of any residential property
–
Legislation nearly eliminated issuance of new video
poker truck plaza licenses
Additional barriers to entry include restrictions that require
video poker truck plazas:
–
Meet specified minimum levels of fuel sales
–
Maintain a specified minimum site acreage
–
Conduct restaurant operations at least 12 hours per day
–
Keep a convenience store open 24 hours per day
Restriction on maximum number of machines at any single
location
Limited to only those parishes that approved video poker
Statewide truck plaza net gaming revenue
$420.9
$434.7
$398.1
$405.6
$408.5
2008
2009
2010
2011
2012
2013
Source:
Louisiana State Police Video Gaming Division.
Note:
Data presented based on fiscal year end of June 30th.
179
186
195
199
200
201
179
186
195
199
200
201
Number of video poker-equipped truck plazas:
($ in millions)
$412.8 |
 17.9%
19.7%
19.7%
19.0%
18.9%
19.2%
19.5%
19.7%
14.4%
16.5%
16.3%
15.3%
15.0%
14.9%
14.8%
14.9%
2006
2007
2008
2009
2010
2011
2012
LTM 6/30/13
Market share
Fair share
Video poker truck plazas
Jacobs Entertainment has
a
dominant market share in the Louisiana
video poker market
22
Jacobs Entertainment has continually captured more than its fair
share in the Louisiana video poker market
(1)
(2)
Dominant
market
share
driven
by
optimal
site
location
–
interstate
accessibility
that
is
proximate to a locals customer base
Source:
Louisiana State Police Video Gaming Division and Company filings.
Note:
Data presented on calendar year basis. Historical results represented pro forma for recent truck
stop acquisitions. Includes 100% of revenue and positions of the revenue share truck plaza.
(1)
Market share is calculated as the gross gaming revenue for the Company’s video poker truck plazas
as a percentage of the total revenue of the Louisiana video gaming market. (2)
Fair share is based on unit count for the Company’s video poker truck plazas as a
percentage of the total number of units in the Louisiana video gaming market. |
 Video
poker truck plazas Property overview and performance
23
Jacobs Entertainment video poker truck plaza locations
23 video poker truck plazas located throughout Louisiana
At June 30, 2013, the Company’s poker truck plazas had a
combined total of 1,150 video gaming devices
Video
poker
truck
plazas’
revenues
are
comprised
of:
–
Revenue from video poker gaming machines
–
Sales of gasoline and diesel fuel
–
Sales of groceries, trucker supplies and sundry items
through their convenience stores
–
Sales of food and beverages in their restaurants and
bars
–
Commissions on ATMs, pay phones and lottery sales
Caters primarily to local residents, many of whom live
within a five-mile radius of the property
Overview
Adjusted property EBITDA
$26.0
$21.7
$22.3
$22.1
$23.6
$23.5
2008
2009
2010
2011
2012
LTM
6/30/13
($ in millions)
Note:
During the above presented historical period, the Company completed several related
party acquisitions which were accounted for as combinations of entities under common control. Accordingly, the
financial
statements
for
2008
through
LTM
6/30/13
have
been
retroactively
adjusted
to
include
the
operations
of
these
businesses
as
if
acquired
at
the
beginning
of
the
appropriate
historical
period.
(1)
EBITDA peak in 2008 is largely attributable to increased business activity from
federal agencies and contractors due to Hurricanes Gustav and Ike. (1)
Win per day ($)
$203.5
$189.7
$181.5
$186.2
$192.1
$201.4
2008
2009
2010
2011
2012
YTD
6/30/13 |
 Nevada overview
Gold Dust West properties
24
Gold Dust West
Elko, NV
Gold Dust West
Reno, NV
Gold Dust West
Carson City, NV
485 slots
27 hotel rooms
17,500 gaming
square ft.
Opened: 1978
Acquired and
renovated in
2001 –
2002
(total cost of
$27 million)
382 slots
6 tables
142 hotel rooms
12,000 gaming square ft.
Opened: 1995
Acquired and renovated in
2006 –
2007 (total cost of
$20 million)
346 slots
6 tables
13,000 gaming square ft.
Opened: 2007 (total build-out cost
of $20 million)
(1)
Acquired by Jacobs in January 2001.
(2)
Acquired by Jacobs in June 2006.
(1)
(2) |
 Historical financial performance |
 Summary historical financials
26
$247.8
$279.2
$286.8
$270.6
$260.5
$264.6
$275.1
$272.7
$81.4
$96.1
$116.7
$73.4
$95.9
$119.5
$122.1
$120.9
$329.2
$375.3
$403.5
$344.0
$356.4
$384.1
$397.2
$393.6
2006
2007
2008
2009
2010
2011
2012
LTM
6/30/13
Base Revenue
Fuel Revenue
$50.4
$54.1
$56.8
$54.2
$53.0
$53.0
$54.6
$53.2
15.3%
14.4%
14.1%
15.8%
14.9%
13.8%
13.7%
13.5%
28.3%
28.0%
27.5%
29.2%
27.9%
28.3%
28.1%
27.2%
2006
2007
2008
2009
2010
2011
2012
LTM
6/30/13
Total margin
Gaming margin
Net revenue
Adjusted EBITDA and margin
($ in millions)
($ in millions)
Net revenue consists of gaming revenues, food and beverage sales
and fuel
Between 2006 and 2012, revenue and EBITDA grew at CAGR of ~3% and 1%,
respectively Decrease in revenue in 2009 predominantly related to lower gas
prices at Louisiana truck plazas (1)
Includes Colorado and Nevada casino assets only.
(1) |
 Key
credit strengths 27
Disciplined operating and
investment model: High
margins and strong ROI
Properties in steady
regional gaming markets
Stable and experienced
management team
Stable financial
performance and
cash flows
Broad geographic
and asset diversification
Protected markets with
limited competitive threats |
 28 |