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The casino industrial equipment supply sector appears to be undergoing a period of overhaul. It began when New York-based Scientific Games Inc., which supplies technology to regulated lottery tickets, said in March last year that it would acquire WMS Industries, a larger Chicago-based slot machine specialist, in a $1.5 billion leveraged buyout.
In November, Las Vegas-based slot machine specialist Bali Technologies completed a $1.3 billion leveraged purchase from Nevada neighbor SHFL Entertainment Inc., a leader in electronic card shufflers, traditional table gaming equipment and electronic table gaming supplies.
And in mid-June this year, lottery operator GTech SpA confirmed it was one of several litigants embroiled in rumours in talks to buy Las Vegas-based New York-listed gaming provider International Game Technology (IGT). It was followed by Australian gaming equipment maker Aristocrat Leisure Inc in a late June filing with the Australian Stock Exchange, which called the acquisition of Video Game Technology Inc. "ongoing discussions" in the United States. The value of the potential deal was not mentioned.
On Tuesday, Gaming Partners International Corp (GPI), which offers casino currency and table gaming products, announced a US$19.75 million payment to Gem Group Inc and its subsidiaries, including game card, casino chip and table layout maker Gemaco Inc.
Game industry finance expert Union Gaming Research LLC said in a late June memo regarding IGT: "…If buyers buy IGT at the current level, we estimate they will consider a total of $5.7 billion."
With such a large injection of money, it is important that M&A activities quickly contribute to the profits of the companies that write the checks.
Matt Ryan, a gaming research analyst at JPMorgan in Sydney, currently sees M&A activity in the sector as a potential positive for investors.
"The high fixed cost base and high variable margins of manufacturer R&D mean that when revenue increases, manufacturers generate strong operating leverage," he told GGR Asia, "which is an attractive proposition."
For example, Bali Technologies reported a 49 percent gross margin for its electronic gaming console business in its fiscal third quarter 2014 results released in May, according to a filing to Nasdaq.
Matt Ryan says the casino supply sector's recent acquisition deal was between companies with complementary products and capabilities, a point raised by other analysts regarding the Bali-SHFL deal.
"We haven't seen a lot of consolidation among overlapping equipment vendors in exactly the same product segment. The last time we've seen more consolidation is when we combine businesses that do different things in gaming equipment," he says.
BY: 슬롯사이트