Bally Technologies (BYI) to be Acquired by Scientific Games Corporation in $5.1B Deal
Shares of Bally Technologies Inc. (BYI) were up +3.30 or +4.25 percent to $81.00 per share in pre-market trading on Monday, after the company announced Friday it had agreed to be acquired by Scientific Games Corporation (SGMS) for $83.30 per share in cash. Bally Technologies stock closed at $77.70, up +17.53 or +29.13 percent in Friday's regular trading session.
New York City based Scientific Games Corporation was the first company to introduce a secure lottery ticket in 1974. The company provides gaming products and services to gaming and lottery officials all over the world. The company's main products include lottery gaming systems, instant lottery games, terminals and services, as well as gaming control systems, server based interactive gaming terminals and internet gaming and lottery applications.
The boards of the two companies entered into a definitive merger agreement where Scientific Games agreed to acquire all of Bally's outstanding common stock for $3.3 billion or $83.30 in cash per share, a +38 percent premium over the stock's closing price on July 31st. The deal will also include the refinancing of an estimated $1.8 billion of Bally's existing debt, bringing the aggregate value of the transaction to $5.1 billion.
In a press release after the announcement, Bally's Chief Executive Officer, Richard Hadrill said that, "The combination with Scientific Games will benefit our customers and shareholders, he continued, "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. This transaction delivers immediate value to our shareholders, and the highest share price in our history. We look forward to working with our new colleagues at Scientific Games to execute a detailed integration plan to realize customer satisfaction and additional value.
Gavin Isaacs, President and Chief Executive Officer for Scientific Games noted that, "In addition to the strategic value of the transaction to our customers, we expect to create significant shareholder value as the transaction is expected to deliver immediate earnings and cash flow accretion and will allow us to meaningfully reduce our leverage over the next three to four years. Reflecting both organizations' recent post-merger integration successes, we have identified and expect to realize $220 million in annual cost synergies and $25 million of annual capital expenditure savings by the end of the second year following the closing of the transaction.
The combination of the two companies will create a giant in the gaming industry, adding casino management systems and table products to Scientific Games portfolio of products. The combined company will have worldwide product development capabilities and will create a global base of recurring revenue products and services. The two companies had combined revenue of about $3.0B for the 12-month period ended on March 31st, 2014.
Bally stock is still trading below the $83.30 offering price and will probably continue to trade with volatility until all of Bally's common stock is tendered to Scientific Games. The transaction is expected to close by early 2015.
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