Scientific Games Agrees to Buy WMS for $1.5 BillionChristopher Palmeri
Scientific Games Corp. agreed to buy WMS Industries Inc. for $1.5 billion, the biggest deal in leisure and recreational products in almost two years, to create a global supplier of lottery equipment and slot machines.
The offer of $26 a share is 59 percent higher than WMS’s closing price yesterday. The transaction was approved by both boards unanimously, the companies said today in a statement.
With the deal, Scientific Games, which is 38 percent owned by billionaire Ron Perelman, a director since 2003, expands its offerings for casinos. The New York-based supplier of lottery systems and instant tickets plans to share production, software and customer services with WMS to save money.
The deal creates “a huge opportunity for revenue synergy and to market and sell each others products and to create new products,” Scientific Games Chairman and Chief Executive Officer Lorne Weil said today on a conference call. “We are very complementary.”
Scientific Games surged 13 percent to $10.06 at 12:24 p.m. in New York. WMS, based in Waukegan, Illinois, jumped 52 percent to $24.86, the biggest intraday day gain since at least 1982. Competitors International Game Technology and Bally Technologies Inc. also advanced, gaining almost 7 percent.
The slot machine industry is recovering from the global economic slump that saw casinos defer purchases of new machines, WMS CEO Brian Gamache said in an interview in October. The company unveiled over 100 new games at the industry’s annual trade show in Las Vegas that month, including ones based on the movie “Willy Wonka and the Chocolate Factory” and another featuring the rock band Kiss.
The WMS purchase demonstrates that casino suppliers have been undervalued by investors, David Bain, an analyst at Sterne, Agee & Leach Inc. wrote in a note today.
The transaction is the largest in leisure and recreational products since at least February 2011, according to data compiled by Bloomberg. Scientific Games is paying about 7 times WMS’s earnings before interest, taxes, depreciation and amortization. That compares with the median of about 8.6 times for 26 similar deals, the data show.
The companies generated combined revenue of about $1.6 billion and $579 million in earnings before interest, taxes, depreciation and amortization, according to the statement.
The deal is expected to be completed by the end of this year and produce annual savings of about $90 million, Weil said on the call.
Rivals IGT and Bally trade at multiples of 5.3 and 6.6 times their projected earnings before interest, taxes, depreciation and amortization, below their historical trading ranges, Bain said.
IGT is the target of a proxy battle led by investor Jason Ader, who is trying to install three board members at the world’s largest slot machine maker.
Ader said in a statement that today’s merger “demonstrates the value that smart strategic investors place on the core casino gaming equipment business” and reaffirms his company’s thesis that “the slot machine industry is alive and poised for growth.”
Bank of America Corp. and Credit Suisse Group AG provided financial advice to Scientific Games. The two also committed financing for the transaction alongside UBS AG. Macquarie Group Ltd. served as exclusive financial adviser to WMS.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.