Scientific Games Corp, a specialist in lottery equipment and management, is acquiring fellow gaming equipment maker Bally Technologies Inc in a deal valued at US$5.1 billion, the companies announced on Friday.
The news comes only 18 months after Scientific Games said it was buying Chicago-based slot machine maker WMS Industries Inc in a US$1.5-billion leveraged deal, and only 8 months after Bally Technologies acquired Nevada-based SHFL entertainment Inc in a US$1.3 billion transaction. The tie-up offers Scientific Games new capacity in slot manufacturing and interactive gaming, to add to the electronic table games technology and table equipment supplies provided by SHFL, and the slot and systems expertise of WMS.
This is the second multi-billion dollar deal in less than a month. Italian lottery supplier GTech SpA last month announced that it had entered into a merger agreement with U.S.-based gaming supplier International Game Technology (IGT). GTech will acquire IGT for US$6.4 billion, comprised of US$4.7 billion in cash and stock, and the assumption of US$1.7 billion in net debt.
There has been a raft of other merger and acquisition deals recently in the casino equipment supply sector marking a year of major realignment and consolidation in the industry.
A common denominator in the deal that tied first SHFL to Bally Technologies and now Bally Technologies to Scientific Games, is Gavin Isaacs (pictured), who was appointed Scientific’s chief executive in June. He was previously CEO of SHFL, selling US$3.08-million worth of shares in that company after the Bally Technologies takeover. Mr Isaacs was chief operating officer of Bally Technologies between 2006 and 2011.
Under the latest deal, Scientific Games has agreed to acquire all of the outstanding Bally Technologies common stock for US$83.30 in cash per share, which represents a 38 percent premium to Nasdaq-listed Bally Technologies’ closing stock price on Thursday of US$60.17.
The aggregate transaction value is approximately US$5.1 billion, including the refinancing of approximately US$1.8 billion of existing Bally Technologies net debt. The acquisition would be financed with debt and cash on hand and Scientific Games said it has obtained committed debt financing for the transaction.
“The transaction was unanimously approved by the boards of directors of the two companies,” the companies said in a statement.
Scientific Games said the transaction was expected to be immediately accretive to its earnings per share and cash flow, providing US$220 million in annual cost savings and US$25 million in annual capital expenditure savings by the end of the second year following the closure of the deal.
“With leading gaming, lottery, and interactive content, world-class systems capabilities and table game offerings, we believe that the combined company will be uniquely positioned as a strategic partner for gaming and lottery operators,” said Mr Isaacs.
“The combination with Scientific Games will benefit our customers and shareholders,” said Richard Haddrill, Bally Technologies’ CEO. “Increased scale, geographic diversity and product development capabilities will create a new runway of growth opportunities through new products and a comprehensive portfolio of customer-focused solutions,” he added.
The deal is currently expected to be completed in early 2015. Upon closing, Mr Isaacs will continue as CEO of Scientific Games, and Mr Haddrill is expected to serve as vice chairman of the board of directors of Scientific Games.
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