Scientific Games to Acquire Bally Technologies in $5.1 Billion Deal
On Friday, August 1st, Scientific Games, one of the world’s largest lottery technology developers as well as a leading overall gaming technology provider agreed to buy slot machine and gaming system developer Bally Technologies. Scientific Games is acquiring all of the outstanding common stock of Bally’s at $83.30 per share and will refinance about $1.8 billion in Bally debt in a total transaction valued at $5.1 billion.
This is the second billion dollar-plus acquisition by Scientific Games in the past year and a half. In January 2013, it bought gaming machine maker WMS Industries for $1.5 billion. Interestingly, both WMS and Bally began as pinball machine manufacturers.
Last July, Bally Technologies purchased SHFL Entertainment (formerly Shuffle Master) for $1.3 billion. SHFL is probably best known amongst poker players as the maker of automatic card shufflers, but it is also a major player in the table game and slot machine arena. After swallowing the fish that swallowed SHFL, Scientific Games is growing into quite the monster in the gaming system and equipment industry.
It is probably no coincidence, either, that Scientific Games Chief Executive Officer Gavin Isaacs once held that same position at SHFL Entertainment and was Chief Operating Officer of Bally Technologies. He was named the top man at Scientific Games in June of this year.
“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 and is occurring at a truly opportune time as both companies are committed to bringing the highest value products and services to customers,” Isaacs said in a press release.
Refreshingly, he also provided some insight into the benefits of the merger, other than just using generalities like “synergies” and “value” (though he does do that):
The combined company will feature world-class research and development capabilities, an expanded base of recurring revenues and greater worldwide penetration in key geographies, including the AustralAsia region. In addition to the strategic value of the transaction to our customers, we expect to create significant shareholder value as the transaction is expected to deliver immediate earnings and cash flow accretion and will allow us to meaningfully reduce our leverage over the next three to four years. Reflecting both organizations’ recent post-merger integration successes, we have identified and expect to realize $220 million in annual cost synergies and $25 million of annual capital expenditure savings by the end of the second year following the closing of the transaction.
“The combination with Scientific Games will benefit our customers and shareholders,” said an equally excited Bally Technologies Chief Executive Officer Richard Haddrill. “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. This transaction delivers immediate value to our shareholders, and the highest share price in our history. We look forward to working with our new colleagues at Scientific Games to execute a detailed integration plan to realize customer satisfaction and additional value.”
It remains to be seen if this merger will have any effect on the regulated online gaming industry in the United States. In June 2012, Bally Technologies became the very first company to be awarded an online gaming license in Nevada. In February 2013, it entered into a “memorandum of understanding” with Amaya Gaming in which it would integrate Amaya’s poker platform and casino games into its own interactive gaming platform. Bally gave itself some flexibility, though, as Amaya was only its “preferred poker provider,” meaning Bally was under no obligation to partner with Amaya for every online poker venture it wanted to embark upon.
This partnership with Amaya was needed because while Bally Technologies had the necessary gaming hardware developed, it didn’t have the poker software to offer a product in Nevada. In September 2012, Bally had agreed to provide American Casino and Entertainment Properties, LLC (ACEP), the parent of the Stratosphere casino, its poker product.
Bally Technologies has not launched an online poker room yet. There are currently only three internet poker rooms in Nevada: Caesar Interactive’s WSOP.com, UltimateGaming’s Ultimate Poker, and South Point Casino’s RealGaming. More may be coming soon, however, as the plans for an inter-operator online poker network in Nevada were approved about a week ago. The network would be developed by 888 Holdings using its poker software, already being used by WSOP.com. WSOP.com will be one of the first poker rooms on the network along with an offering from the Treasure Island casino and a possible third poker room running 888’s software.