Shares of Bowlero surged following the completion of a $432.9 million sale-leaseback transaction, providing the bowling-center operator with fresh capital to drive its expansion efforts.
Stock Rise and Prior Challenges
The company's stock experienced an impressive 13% premarket surge, reaching $12.27. This boost comes after a year of struggle for Bowlero, with shares down by 19% due to decreased foot traffic and concerns over consumer spending.
Sale and Lease Agreement
Under the deal, Bowlero sold the real estate of 38 locations across 17 states to VICI Properties, a prominent real estate investment trust. Subsequently, Bowlero entered into a triple-net master lease agreement with VICI, with an initial annual rent of $31.6 million. The lease includes rent escalation at a rate of either 2% or the general inflation rate, capped at 2.5%.
Utilizing the Proceeds
Bowlero intends to strategically allocate the proceeds from the sale to bolster its expansion plans. The funds will be directed towards the construction of new bowling centers, the acquisition of new locations, and the conversion of existing facilities. Additionally, Bowlero aims to reduce its debt and provide returns to shareholders.
Continued Growth Trajectory
Bowlero has been actively pursuing growth opportunities, acquiring various standalone bowling centers. Notably, the company recently completed its acquisition of Lucky Strike, a renowned chain of bowling centers located primarily in urban areas.
Industry analysts at Oppenheimer, Ian Zaffino and Isaac Sellhausen, speculate that funds from the sale-leaseback deal may facilitate a rebranding effort. If realized, this could potentially transform Bowlero into Lucky Strike.