Scientific Games to acquire rival Bally in $5.1bn deal

iders Scientific Games (SG) and Bally Technologies are to enter into an definitive merger agreement worth $5.1bn, it was announced today.

Scientific Games will acquire all of Bally’s stock for $83.30 cash per share, representing a 38% premium on Bally’s closing stock price of $60.17 on 31 July. The $5.1bn figure is aggregate, including the refinancing of approximately $1.8bn of existing Bally debt. The transaction has been unanimously approved by the boards of directors of both firms.

The acquisition will be financed with debt and cash on hand. Scientific Games has secured committed debt financing for the transaction, which is not subject to a financing contingency.

Gavin Isaacs, president and CEO of Scientific Games, said: “The acquisition of Bally provides us with a unique opportunity to combine two exceptional companies with long track records of creating leading-edge games and gaming technology products for players and delivering innovative solutions to our customers.

“With leading gaming, lottery and interactive content, world-class systems capabilities and table games offerings we believe that the combined company will be uniquely positioned as a strategic partner for gaming and lottery operators, offering a highly diversified suite of value-enhancing products and services across multiple worldwide distribution channels and platforms.”

The transaction will expand Scientific Games’ portfolio of products and solutions to include casino management systems and table products, including automatic shufflers, proprietary table games and electronic table systems, along with social and real money i-gaming and i-lottery products and services.

The firms said this will position Scientific Games to better cross-utilise content and technology across the lottery, gaming and interactive sectors to propel future growth.

Furthermore the merger is expected to improve Scientific Games sourcing, production, engineering and product development capabilities, as well as a large installed global base of diverse recurring revenue products and services.

Scientific Games and Bally generated combined revenue of approximately £3bn in the 12 months leading up to 31 March this year.

Scientific Games expects to achieve an anticipated $220m of cost synergies and $25m of capital expenditure savings by consolidating operations and increasing efficiency in manufacturing, engineering, field and customer service and administrative operations, while incurring $75m in costs to achieve the synergies and $40m in capital costs to complete the merger.

The combined company is also expected to benefit from accelerated utilisation of various tax attributes against US-based pre-tax income.

Richard Haddril, CEO of Bally, said: “The combination with Scientific Games will benefit our customers and shareholders. 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.

“The transaction delivers immediate value to our shareholders and the highest price in our history. We look forward to working with our new colleagues at Scientific Games to execute a detailed integration plan to realise customer satisfaction and additional value.”

Isaacs added that having worked “side-by-side with the talented teams” at both firms, he is confident the merger “brings together the best-of-breed cultures” and is occurring at a “truly opportune” time for both.

He continued to say that the combined company will boast “world-class” research and development capabilities, greater worldwide penetration in key geographies and will have realised the $220m cost synergies and $25m of annual capital expenditure savings by the end of the second year following the closing of the transaction.

The acquisition is subject to closing conditions, including receipt of Bally shareholder approval and antitrust and gaming regulatory approvals. Bally and Scientific Games are licensed in more than 300 jurisdictions worldwide, which is expected to facilitate receiving the required gaming regulatory approvals.

Upon closing of the transaction, it is expected Isaacs will continue as president and CEO of Scientific Games, while Haddrill and David Robbins, chairman of the board of directors at Bally, will join the board of directors of Scientific Games, where Haddril will serve as vice chairman.

The deal is anticipated to close by early 2015.