SciGames agrees $1.5bn WMS takeover
Scientific Games pays $26 a share for slots manufacturer with shares in WMS rallying in pre-marklet trades to more than $16.
Lottery and gaming software provider Scientific Games Corporation has agreed terms with slot game manufacturer WMS Industries to acquire the business for US$1.5bn in cash, the equivalent to $26 a share.
The deal represents an EBITDA multiple of six times WMS’ adjusted EBITDA of $246m for the 12-month period ended September 30, 2012, excluding synergies that Scientific Games said it “expects to achieve”.
Shares in WMS closed last night at $16.37 a share, while news of the deal sent WMS’s share price up 56% in pre-market trades to $25.60 a share.
The acquisition would “combine two leading companies in the gaming industry to create an organisation that will supply an extensive range of products and services to public and private sector lottery and gaming customers throughout the world,” the companies said in a joint statement posted early this morning New York time.
“The [merged] company [will] deliver innovative content, world-class technology and industry-leading services”, it said adding that the transaction is expected to immediately be “accretive to Scientific Games’ earnings per share”.
The transaction was “unanimously” approved by both Scientific Games and WMS’ boards of directors.
Scientific Games is a leader in the supply of lottery instant tickets, lottery and video gaming systems and server-based gaming with the majority of its client base in the US and an emerging business in Europe. Scientific Games is also the existing supplier to the Delaware lottery, one of only two US states that has approved online gaming, however it is expected to have to re-tender with a new gaming RFP due out imminently.
WMS supplies gaming machines, again largely to US customers, but in recent years has developed more online content culminating in it spinning off its egaming arm to form Williams Interactive, headed up by long serving WMS executive Orrin J Edidin.
In November last year during its first set of results since making two online acquisitions earlier in 2012, Brian Gamache, WMS chairman and CEO said the company was generating “very exciting” growth from interactive products.
A US$9m year-on-year growth in revenue from interactive products and services saw WMS Industries record first quarter turnover of US$159.1m.
Its online products and services revenue increased to $9.5m for its fiscal first quarter of 2013 from $0.7m in the same period in 2012, primarily reflecting the launch of Jackpot Party social casino on Facebook in July last year.
Organic growth in WMS’s UK-based B2C online website and the addition of the newly-acquired Phantom EFX and Jadestone businesses were also cited as major contributors to the boost in revenues.
Lorne Weil, Scientific Games’ chairman and CEO called the acquisition “transformational” for the company “enabling us to offer a complete portfolio of lottery and gaming products and services to both new and existing customers around the world”.
“We expect to combine our game content, technology, operational capabilities and respective geographic footprints to create an enterprise poised to capitalise on significant growth opportunities around the globe,” he said.
Jeffrey Lipkin, Scientific Games’ CFO added that the combination of the two businesses would diversify Scientific Games’ revenue base, expand margins and propel future growth opportunities.
WMS’s Gamache said the combination of Scientific Games and WMS “yields tremendous benefits to our customers, shareholders and employees”.
“We view this transaction as the next logical and strategic step in offering continued innovation in gaming. Shareholders will enjoy a meaningful premium for their shares and employees will have expanded career opportunities as part of a larger, broader and more diverse organisation. We are delighted with this transaction and look forward to working with our new colleagues at Scientific Games.”
Scientific Games said it expects to achieve “significant synergies” through revenue growth, shared costs and larger scale, as well as by monetising its significant US tax attributes.
Excluding anticipated synergies, the combined companies generated combined revenue of approximately $1.6bn and combined attributable EBITDA of approximately $579m over the 12-month period ended September 30, 2012, the statement added.
The two companies plan to draw on each organisation’s core strengths to:
- Broaden offerings
- Bring gaming products to new sectors and geographies
- Accelerate key growth initiatives and offer enhanced capabilities, systems, field service and content.
- Scientific Games global footprint, including its position in server-based gaming, should help accelerate WMS’ international development initiatives.
Other benefits:
- The addition of WMS’ gaming business will diversify Scientific Games’ assets.
- The combined Lottery/egaming platform and content will expand the scope of the combined company’s interactive products. WMS has a well-developed egaming platform, including social and mobile gaming, while Scientific Games has an advanced platform for iLottery, sports book and loyalty/rewards.
- Scientific Games expects significant opportunities to cross-sell these products to the companies’ respective customers.