Suddenly, complications are occurring in the gaming industry.
The third major deal in eight months was announced Tuesday as slot machine maker Bali Technologies announced it was buying game equipment maker SHFL Entertainment for $1.3 billion.
Bally, one of the game industry’s largest slot machine developers, will pay SHFL shareholders $23.25 per share, 24% above the company’s Monday closing price.
The deal requires approval from SHFL shareholders, game regulators in Nevada and other states, and the Federal Trade Commission. The deal is expected to close by June 2014.
Shares of both companies reacted positively to the announcement on Tuesday. In New York, Bali shares closed up $4.22, or 6.93%, at $65.13. SHFL shares closed up $4.11, or 21.98%, at $22.81.
Wall Street was quick to praise the deal, which offered additional products such as SHFL’s line of table game management systems, exclusive table games, electronic table games and further inroads into Asia and Australia. 온라인경마
“Although Bally is paying relatively expensive multiples for SHFL, we are seeing a lot of corporate operational synergies,” Credit Suisse game analyst Joel Simkins told investors. “Also, we believe SHFL offers Bally a leading table gaming platform, improved interactive gaming capabilities, and international diversification.”
Bali says the deal could save $30 million a year in operating costs.
BALI-SHFL MERGING IS THE SECOND EXPRESSED TRANSACTION WITH GAME EQUIPMENT SUPPLIERS.
In December, Pinnacle Entertainment, a local casino operator, said it was buying rival Amerista Casino for $2.8 billion.
In January, lottery giant Scientific Games announced it would buy slot machine maker WMS Industries for $1.5 billion.
Analysts said the gaming equipment sector has long been “ripe for consolidation,” but the economy and credit market declines have halted many deals.
Deutsche Bank gaming analyst Carlo Santarelli says Scientific Games-WMS deal may have been catalyst for Bali and SHFL.
“While the dynamics of each transaction are unique, we cannot ignore the fact that both strategic and private equity bidders participated in the bidding process of the company, which ultimately agreed to terms and conditions of the valuation multiple in the north of the cash flow,” Santarelli said in his research report.
“We believe this deal is meaningful for Bali,” he said.
Previously known as the Shuffle Master, SHFL manufactures table game management equipment, such as automated card shufflers, and distributes nontraditional casino games, such as Three Card Poker, Ultimate Texas Hold’em, and Caribbean Stud. The company also manufactures electronic table games.
Bali Technologies CEO Ramesh Srinivasan said the acquisition of SHFL would expand the company’s reach in the casino floor beyond providing current slot machines and gaming systems.
SHFL has a virtual monopoly in the game shuffler market, and the acquisition gives Bali an additional advantage in selling casino equipment.
“This combination will enable Bali to provide customers with the world’s best gaming suite and industry-leading branded content for the entire casino floor,” Srinivasan said in a conference call with analysts.
In an interview, he said the merger of Bali and SHFL’s interactive division gives the company a stronger presence in the growing internet gaming market.
“The acquisition of SHFL represents a big leap for Bally to create world-class end-to-end gaming technology innovation,” said Srinivasan.
Stern Age gaming analyst David Bain said other slot machine companies may regret not buying SHFL.
“Many investors and industry insiders have often suggested that SHFL will be one of the best acquisitions for a large domestic slot supplier given its unique core capabilities, adding to slot sales and diversity outside the domestic market,” Bain said.
Steven Weeczynski, a game analyst at Stifel Nicholas Capital Markets, said the deal eliminated a solid competitor in the slot machine category. SHFL is moving sales of its Australia-based Star Game product to North America.
“It took us longer than we expected, but we always believed SHFL was the perfect company for one of our key game makers to acquire,” Weeczynski said.
SHFL CEO Gavin Isaacs said the deal was a good deal for the company’s shareholders, who will receive a 40% per share price above the company’s average closing price over the past three months.
“From a strategic perspective, we are bringing together two of the best-in-class, complementary, customer-centric companies with a common emphasis on innovation,” Isaacs said.
Bally employs 975 people at Las Vegas, and SHFL has 350 employees at its headquarters.
As part of the deal, Bali will take on $8 million in debt and $41 million in cash from SHFL.
