lottery manufacturer Scientific Games Corporation is to purchase Bally Technologies, Inc. for $5.1 billion.
It was announced on Friday that lottery manufacturer Scientific Games Corporation is to purchase Bally Technologies, Inc. for $5.1 billion.
Bally Technologies is one of the largest slot machine firms in the industry today.
Scientific Games Corporation is based in New York. The firm will take control of all of the outstanding shares of Las Vegas-based Bally for $83.30 per share, which is valued at $3.3 billion. The company will also assume the company’s debt – which is estimated at approximately $1.8 billion.
This purchase is not the first major gaming industry merger in recent times. Indeed, in July, the Italian lottery company GTECH Holdings announced that it was buying slot machine maker IGT – International Game Technology for $6.4 billion.
The deal to buy Bally strengthens Scientific Games’ move into the slot machine side of the industry, following their purchase last year of slot machine maker WMS Industries for $1.5 billion.
Speaking to investors, Credit Suisse gaming analyst Joel Simkins, said: “In our view, this deal could mark the culmination of substantially all the mega-deals in the space. While there are still a handful of relevant domestic-international players, they may have to start thinking about future options.”
Scientific Games released a statement concerning their purchase, stating that the transaction will result in $220 million in annual cost savings and $25 million of annual capital expenditure savings by the end of the second year.
The deal means that Bally’s former executive, Gavin Isaacs will return to his former company, where he had previously spent several years working as the Chief Operating Officer for Bally before jumping ship to become the CEO of SHFL entertainment, which was bought last year by Bally bought for $1.3 billion. Isaacs became CEO of Scientific Games earlier this year.
During a conference call on Friday to discuss the merger, Mr Isaacs said that it took three and a half weeks for the deal to be worked out after Scientific Games originally approached Bally.
Mr Isaacs said that it is “a marriage made in heaven, and obviously for me, a dream come true.
“Having worked side-by-side with the talented teams at Bally and more recently Scientific Games, I am confident this combination brings together best-of-breed cultures.”
The transaction is still awaiting approval from gaming regulators and shareholders. However, it is expected to close next year. The transaction will also require federal anti-trust regulatory approval.
Mr Isaacs does not, however, believe there are going to be any issues with the deal.
Brian McGill, a Buckingham Research gaming analyst, says that the transaction will mean a combined market share of 35 per cent.
“The industry is very competitive and this transaction does not change the landscape dramatically,” Mr McGill said.
Scientific Games’ largest shareholder is the financier Ronald Perelman, who owns 38 per cent of the company. Mr Perelman is ranked 27th on Forbes’ list of 400 billionaires. He has a reported net worth of $14 billion.
Stifel Nicolaus Capital Markets gaming analyst, Steven Wieczynski, stated that the deal means a company has been created that will be able to compete with the latest GTECH-IGT combination in both the lottery world and the slot machine side of the gambling market.
Mr Wieczynski said: “It’s pretty clear that deal (GTECH-IGT) was a game changer for the industry. We have to say we are a bit surprised at how fast this deal came together. While there has been a tremendous amount of consolidation in the gaming equipment space recently, we didn’t see this combination coming together so quickly.”
During the conference call, Mr Isaacs said that the gaming industry was getting broader and the transaction doesn’t lessen competition in the marketplace.
“There are more companies making major inroads into the industry,” he said.
Union Gaming Group analyst, Robert Shore, has stated that Mr Isaacs is the correct man to be leading the merger, because of his previous roles with both Bally and SHFL.
“The new combined company creates another massive global lottery and equipment company with a large presence across multiple equipment segments,” he said.
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