From Pokerati
Let’s halt one rumor before it gains traction.
Scientific Games Corp.’s $1.5 billion acquisition of slot machine manufacturer WMS Industries doesn’t mean a statewide lottery is headed to Nevada.
New York-based Scientific Games provides lottery systems and equipment to U.S. states, Canadian provinces and foreign governments. The company was actively seeking to acquire a traditional slot machine vendor when the buyout was announced in February.
It wasn’t about bringing a lottery to Nevada.
That said, Wall Street, which was skeptical about the deal, is starting to find some comfort with the transaction.
Scientific Games is paying $26 per share for WMS, roughly 59 percent above the slot maker’s closing stock price on Jan. 31.
When the buyout was announced, both WMS and Scientific Games officials said the transaction would provide $100 million of synergistic cost-savings between the merged companies.
Now, analysts say the prediction might be on the low side.
Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski recently hosted meetings between investors and Scientific Game executives, including Chief Financial Officer Jeff Lipkin.
Wieczynski later said Scientific Games, which is traded on the Nasdaq, could see its trading multiple expand as investors gain a better understanding of the company’s quarterly estimates.
“We continue to grow more comfortable with the pending WMS acquisition from both a fundamental and more importantly business stability perspective,” Wieczynski said.
The buyout is moving more smoothly than the gaming industry’s other high-profile merger. Pinnacle Entertainment’s $2.8 billion acquisition of Ameristar Casinos has run into federal antitrust issues in St. Louis and Lake Charles, La.
In March, the Federal Trade Commission signed off on Scientific Games’ buyout, saying there are no antitrust issues.
WMS is considered the third-largest slot machine manufacturer behind International Game Technology and Bally Technologies. Smaller companies, such as Konami Gaming, Aristocrat Technologies, and Multimedia Games, have slowly gained market-share, thanks partly to casino expansion in Ohio, Maryland, Pennsylvania and other markets.
WMS has branched into social- and interactive-gaming platforms, which could be used in Scientific Games’ lottery markets.
