NEW YORK, Jan. 31, 2013
/PRNewswire/ -- Scientific Games Corporation (Nasdaq: SGMS)
and WMS Industries Inc. (NYSE: WMS) today announced that the
companies have entered into a definitive agreement under which
Scientific Games has agreed to acquire WMS for $26.00 in cash per common share or approximately
$1.5 billion.
The transaction, which was unanimously approved by both the
Scientific Games and WMS Boards of Directors, combines two leading
companies in the gaming industry to create an organization that
will supply an extensive range of products and services to public
and private sector lottery and gaming customers throughout the
world. Scientific Games is a leader in the supply of lottery
instant tickets, lottery and video gaming systems and server-based
gaming. WMS is a leader in the supply of gaming machines and
interactive gaming content.
"The acquisition of WMS is transformational for Scientific
Games, enabling us to offer a complete portfolio of lottery and
gaming products and services to both new and existing customers
around the world," said A. Lorne
Weil, Scientific Games' Chairman and Chief Executive
Officer. "We expect to combine our game content, technology,
operational capabilities and respective geographic footprints to
create an enterprise poised to capitalize on significant growth
opportunities around the globe."
"This combination will diversify Scientific Games' revenue base,
expand margins and propel future growth opportunities. Importantly,
as we realize efficiencies from our increased size and scope, we
should be able to deliver meaningful value to shareholders through
the deal's immediate earnings per share accretion, significantly
improved free cash flow and anticipated synergies," said
Jeffrey S. Lipkin, Scientific Games'
Chief Financial Officer.
"The combination of Scientific Games and WMS yields tremendous
benefits to our customers, shareholders and employees," said
Brian R. Gamache, WMS' Chairman and
Chief Executive Officer. "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 organization. We
are delighted with this transaction and look forward to working
with our new colleagues at Scientific Games."
Improved Operating Efficiencies
Scientific Games expects to achieve synergies through revenue
growth, shared costs and larger scale, as well as by monetizing its
significant U.S. tax attributes. The combined company will also be
able to efficiently utilize shared manufacturing, engineering,
software, field maintenance and customer service to drive growth
and cost savings.
Excluding anticipated synergies, the combined companies
generated combined revenue of approximately $1.6 billion and Combined Attributable EBITDA of
approximately $579 million over the
trailing 12-month period ended September 30,
2012.
Complementary Businesses Leveraging Core Competencies
Scientific Games and WMS will draw on each organization'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' strong global footprint, including its position
in server-based gaming, should help accelerate WMS' international
development initiatives. The addition of WMS' gaming business will
also diversify Scientific Games' global business assets.
Furthermore, Scientific Games and WMS are both known for their
product innovation and creative content and will offer an expansive
combined portfolio to customers. The combined company will be well
positioned to capitalize on government sponsored gaming utilizing
Scientific Games' established global platform and experience in
providing lottery and gaming systems, products and services to
governments.
Strengthened Position in Interactive Gaming
The combined iLottery/iGaming platform and content will
significantly expand the scope of the combined company's
interactive products. WMS has a well-developed iGaming
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.
Transaction Terms and Execution
Scientific Games will acquire all of the outstanding shares of
WMS for $26.00 per share in cash, for
a total enterprise value of approximately $1.5 billion, including debt of $85 million and cash on hand of $55 million as of September 30, 2012. This consideration
represents an EBITDA multiple of 6.0x WMS' Adjusted EBITDA of
$246 million for the trailing
12-month period ended September 30,
2012, excluding synergies that Scientific Games expects to
achieve.
The acquisition, which is subject to the approvals of WMS
shareholders and gaming regulatory authorities and other customary
closing conditions, is expected to be completed by the end of
2013. Scientific Games has obtained committed financing for
the transaction and the transaction is not subject to a financing
contingency.
Financial and Legal Advisory
BofA Merrill Lynch and Credit Suisse Securities (USA) LLC served as the financial advisors to
Scientific Games and Cleary Gottlieb
Steen & Hamilton LLP served as the legal advisor to
Scientific Games for the transaction. BofA Merrill Lynch,
Credit Suisse and UBS provided the committed financing for the
transaction, with Latham & Watkins LLP serving as the legal
advisor to Scientific Games for such financing.
Macquarie Capital acted as exclusive financial advisor to WMS
with respect to this transaction and Skadden, Arps, Slate, Meagher
& Flom LLP and Blank Rome LLP served as WMS' legal
advisors.
Conference Call Details
Scientific Games will host a conference call today, January 31, 2013 at 8:00
am Eastern Time to discuss the proposed acquisition.
To access the call live via a listen-only webcast, please visit
www.scientificgames.com and click on the webcast link under the
Investor Information section. To access the call by
telephone, please dial (866) 730-5769 (U.S. and Canada) or (857-350-1593) (international). The
conference ID is 20589745.
A presentation that will be discussed on the call will be
available in the Investor Information section on the Scientific
Games website prior to the conference call. A replay of the webcast
and accompanying presentation will be archived in the Investor
Information section on the Scientific Games
website.
About Scientific Games
Scientific Games Corporation is a global leader in providing
customized, end-to-end gaming solutions to lottery and gaming
organizations worldwide. Scientific Games' integrated array of
products and services includes instant lottery games, lottery
gaming systems, terminals and services, and internet applications,
as well as server-based interactive gaming terminals and associated
gaming control systems. For more information, please visit our
website at www.scientificgames.com.
About WMS
WMS serves the gaming industry worldwide by designing,
manufacturing and marketing games, video and mechanical
reel-spinning gaming machines, video lottery terminals and in
gaming operations, which consists of the placement of leased
participation gaming machines in legal gaming venues. The
Company also develops and markets digital gaming content, products,
services and end-to-end solutions that address global online
wagering and play-for-fun social, casual and mobile gaming
opportunities. WMS is proactively addressing the next stage
of casino gaming floor evolution with its WAGE-NET® networked
gaming solution, a suite of systems technologies and applications
designed to increase customers' revenue generating capabilities and
operational efficiency. More information on WMS can be
found at www.wms.com or visit the Company on Facebook®, Twitter® or
YouTube®.
Forward-Looking Statements
This press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements describe future expectations, plans,
results or strategies and can often be identified by the use of
terminology such as "may," "will," "estimate," "intend,"
"continue," "believe," "expect," "anticipate," "estimate,"
"should," "potential," "opportunity," or similar terminology.
These statements are based upon management's current expectations,
beliefs, assumptions and estimates and are not guarantees of future
results or performance. Similarly, statements herein that
describe the proposed transaction, including its financial impact,
and other statements of management's expectations, beliefs,
assumptions, estimates and goals regarding the proposed transaction
are forward-looking statements. It is uncertain whether any
of the events or results anticipated by the forward-looking
statements (including consummation of the proposed transaction)
will transpire or occur, or if any of them do, what impact they
will have on the results of operations and financial condition of
the combined companies or the price of Scientific Games or WMS
stock. These forward-looking statements involve certain risks
and uncertainties that could cause actual results to differ
materially from those indicated in such forward-looking statements,
including but not limited to: the ability of the parties to
consummate the proposed transaction and the satisfaction of the
conditions precedent to consummation of the proposed transaction,
the ability to secure regulatory approvals at all or in a timely
manner; the ability of Scientific Games to successfully integrate
WMS' operations, product lines and technology; the ability of
Scientific Games to implement its plans, forecasts and other
expectations with respect to WMS' business after the completion of
the transaction and realize additional opportunities for growth and
innovation; and the other risks, uncertainties and important
factors contained and identified (including under the heading "Risk
Factors") in Scientific Games' and WMS' filings with the Securities
and Exchange Commission (the "SEC"), such as their respective
Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K, any
of which could cause actual results to differ materially from the
forward-looking statements. The forward-looking statements
included in this press release are made only as of the date
hereof. Neither Scientific Games nor WMS undertakes any
obligation to update the forward-looking statements to reflect
subsequent events or circumstances. WMS is responsible for
information in this press release concerning WMS and Scientific
Games is responsible for information in this press release
concerning Scientific Games.
Non-GAAP Financial Measures
Attributable EBITDA, Adjusted EBITDA and Combined Attributable
EBITDA as used herein are non-GAAP measurements. Attributable
EBITDA of Scientific Games is based on the definition of
"consolidated EBITDA" in Scientific Games' credit agreement
(summarized in its November 6, 2012
press release), except that Attributable EBITDA includes its share
of the EBITDA of all of its equity investments (whereas
"consolidated EBITDA" for purposes of the credit agreement
generally includes its share of the EBITDA of its Italian joint
venture but only the income of its other equity investments to the
extent it has been distributed to Scientific Games).
Attributable EBITDA is a non-GAAP financial measure that is
presented herein as a supplemental disclosure and is reconciled to
net income (loss) in the accompanying table. Adjusted EBITDA
of WMS is defined as earnings before depreciation, amortization,
income taxes, interest income and expense, share-based compensation
and other non-cash items, including non-cash impairment and
restructuring charges. Adjusted EBITDA is a non-GAAP
financial measure that is presented herein as a supplemental
disclosure and is reconciled to net income (loss) in the
accompanying table.
As used herein, Combined Attributable EBITDA reflects the
arithmetic sum of Scientific Games' Attributable EBITDA and WMS'
Adjusted EBITDA for the trailing 12-month period ended September 30, 2012, and does not include any
synergies Scientific Games expects to achieve. Combined
Attributable EBITDA does not reflect any adjustments resulting from
the proposed transaction and does not represent a "pro forma"
amount determined in accordance with the SEC's rules and
regulations, including Article 11 of Regulation S-X.
Scientific Games' management uses Attributable EBITDA in
conjunction with GAAP financial measures to: monitor and evaluate
the performance of Scientific Games' business operations, as well
as the performance of its equity investments, which have become a
more significant part of Scientific Games' business; facilitate
management's internal comparisons of Scientific Games' historical
operating performance of its business operations; facilitate
management's external comparisons of the results of its overall
business to the historical operating performance of other companies
that may have different capital structures and debt levels; review
and assess the operating performance of Scientific Games'
management team; analyze and evaluate financial and strategic
planning decisions regarding future operating investments; and plan
for and prepare future annual operating budgets and determine
appropriate levels of operating investments. Accordingly,
Scientific Games' management believes that this non-GAAP financial
measure is useful to investors to provide them with disclosures of
Scientific Games' operating results on the same basis as that used
by Scientific Games' management.
In addition, Scientific Games' management believes that
Attributable EBITDA is helpful in assessing the overall operating
performance of Scientific Games and its equity investments and
highlighting trends in Scientific Games' and its equity
investments' core businesses that may not otherwise be apparent
when relying solely on GAAP financial measures, because this
non-GAAP financial measure eliminates from Scientific Games' and
its equity investments' earnings financial items that management
believes have less bearing on Scientific Games' and its equity
investments' performance, such as income tax expense, depreciation
and amortization expense and interest (income) expense.
Moreover, management believes Attributable EBITDA is useful to
investors because a significant and increasing amount of Scientific
Games' business is from its equity investments. Scientific
Games' management also believes that Attributable EBITDA is useful
to investors because the definition is derived from the definition
of "consolidated EBITDA" in Scientific Games' credit agreement,
which is used to calculate Scientific Games' compliance with the
financial covenants contained in the credit agreement.
Moreover, Attributable EBITDA is used in determining
performance-based bonuses (subject to certain additional
adjustments in the discretion of Scientific Games' Compensation
Committee (e.g., to take into account changes in applicable
accounting rules during the year)). Accordingly, Scientific Games'
management believes that this non-GAAP financial measure provides
both management and investors with financial information that can
be useful in assessing Scientific Games' financial condition and
operating performance.
Attributable EBITDA of Scientific Games as used herein should
not be considered in isolation of, as a substitute for, or superior
to, financial information prepared in accordance with GAAP.
Attributable EBITDA as defined herein may differ from similarly
titled measures presented by other companies. This non-GAAP
financial measure, as well as other information in this press
release, should be read in conjunction with Scientific Games'
financial statements filed with the Securities and Exchange
Commission.
Adjusted EBITDA of WMS is a supplemental non-GAAP financial
metric used by WMS' management and commonly used by industry
analysts to evaluate WMS' financial performance. Adjusted EBITDA
provides additional useful information to investors regarding WMS'
ability to service debt and is a commonly used financial analysis
metric for measuring and comparing gaming companies in areas of
liquidity, operating performance, valuation and leverage. Adjusted
EBITDA should not be construed as an alternative to operating
income as determined in accordance with U.S. generally accepted
accounting principles. All companies do not calculate Adjusted
EBITDA in necessarily the same manner, and WMS' presentation may
not be comparable to those presented by other companies.
Additional Information and Where to Find It
WMS intends to file with the SEC a proxy statement in connection
with the proposed transaction with Scientific Games. The
definitive proxy statement will be sent or given to the
stockholders of WMS and will contain important information about
the proposed transaction and related matters. SECURITY
HOLDERS ARE URGED TO READ THE PROXY STATEMENT CAREFULLY WHEN IT
BECOMES AVAILABLE. The proxy statement and other relevant
materials (when they become available), and any other documents
filed by WMS with the SEC, may be obtained free of charge at the
SEC's website, at www.sec.gov. In addition, security holders
will be able to obtain free copies of the proxy statement from WMS
by contacting Investor Relations by mail at Attn: Investor
Relations, Investor Relations, 800 S. Northpoint Boulevard,
Waukegan, IL 60085.
Participants in the Solicitation
Scientific Games and WMS and their respective directors and
executive officers and other persons may be deemed to be
participants in the solicitation of proxies in connection with the
proposed merger. Information about Scientific Games'
directors and executive officers is included in Scientific
Games' Annual Report on Form 10-K for the year ended
December 31, 2011, filed with the SEC
on February 29, 2012 and the proxy
statement for Scientific Games' 2012 Annual Meeting of
Stockholders, filed with the SEC on April
26, 2012. Information about WMS' directors and
executive officers is included in WMS' Annual Report on Form 10-K
for the fiscal year ended June 30,
2012, filed with the SEC on August
21, 2012 and in the proxy statement for WMS' 2012 Annual
Meeting of Stockholders, filed with the SEC on October 17, 2012. Additional information
regarding these persons and their interests in the merger will be
included in the proxy statement relating to the merger when it is
filed with the SEC. These documents can be obtained free of
charge from the sources indicated above.
Contacts
For Scientific Games
Investor Relations:
Cindi Buckwalter, (212) 754-2233
Media Relations:
Aimee Remey, (212) 754-2233
Abernathy MacGregor
Tom Johnson, (212) 371-5999,
tbj@abmac.com
Michael Pascale, (212) 371-5999,
mmp@abmac.com
For WMS
Investor Relations:
Bill Pfund, (847) 785-3167,
bpfund@wms.com
Media Relations:
Mollie Cole, (773) 961-1194,
mcole@wms.com
Joe Jaffoni or Richard Land
JCIR, (212) 835-8500, wms@jcir.com
NON-GAAP FINANCIAL MEASURES
|
(Unaudited, in millions)
|
|
Three
Months Ended
|
|
Last
Twelve Months Ended
|
|
12/31/2011
|
3/31/2012
|
6/30/2012
|
9/30/2012
|
|
9/30/2012
|
|
|
|
|
|
|
|
Reconciliation to Scientific Games Attributable
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scientific
Games Net income (loss)
|
$
(8.5)
|
$
1.8
|
$
(12.6)
|
$
(27.1)
|
|
$
(46.4)
|
Add:
Income tax expense
|
3.1
|
4.9
|
3.3
|
5.1
|
|
16.3
|
Add:
Depreciation and amortization expense
|
30.7
|
30.5
|
39.1
|
39.2
|
|
139.5
|
Add:
Interest expense
|
25.5
|
24.9
|
24.2
|
26.0
|
|
100.6
|
Add: Early
extinguishment of debt
|
-
|
-
|
-
|
15.5
|
|
15.5
|
Add: Other
expense (income), net
|
1.1
|
(0.5)
|
1.1
|
(0.5)
|
|
1.2
|
Scientific Games EBITDA
|
$
51.9
|
$
61.6
|
$
55.1
|
$
58.2
|
|
$
226.7
|
|
|
|
|
|
|
|
Credit
Agreement adjustments:
|
|
|
|
|
|
|
Add:
Debt-related fees and charges
|
$
0.9
|
$
-
|
$
0.1
|
$
15.5
|
|
$
16.4
|
Add:
Amortization of intangibles
|
-
|
-
|
-
|
-
|
|
-
|
Add:
Earn-outs for permitted acquisitions
|
-
|
-
|
-
|
-
|
|
-
|
Add:
Extraordinary charges or losses under GAAP
|
-
|
-
|
-
|
-
|
|
-
|
Add:
Non-cash stock-based compensation expenses
|
6.2
|
5.8
|
5.9
|
5.9
|
|
23.8
|
Add:
Deferred contingent compensation expense
|
-
|
-
|
-
|
-
|
|
-
|
Add:
Non-recurring write-offs under GAAP
|
0.1
|
-
|
-
|
-
|
|
0.1
|
Add:
Acquisition advisory fees
|
0.6
|
-
|
0.7
|
0.5
|
|
1.8
|
Add:
Specified permitted add-backs
|
2.7
|
3.0
|
6.8
|
2.3
|
|
14.8
|
Add:
Italian concession obligations
|
-
|
-
|
-
|
-
|
|
-
|
Add:
Racing disposition charges and expenses
|
-
|
-
|
-
|
-
|
|
-
|
Add:
Playtech royalties and fees
|
1.6
|
1.6
|
1.9
|
1.8
|
|
7.0
|
Less:
Interest income
|
(0.1)
|
(0.0)
|
(0.0)
|
(0.3)
|
|
(0.4)
|
Less:
Extraordinary income or gains under GAAP
|
-
|
-
|
-
|
-
|
|
-
|
Less:
Income on earn-outs for permitted acquisitions
|
-
|
-
|
-
|
-
|
|
-
|
|
-
|
-
|
-
|
-
|
|
-
|
Adjustments to conform to Credit Agreement
definition:
|
-
|
-
|
-
|
-
|
|
-
|
Add/Less:
Other expense (income), net
|
(1.1)
|
0.5
|
(1.1)
|
0.5
|
|
(1.2)
|
Add/Less:
Early extinguishment of debt
|
-
|
-
|
-
|
(15.5)
|
|
(15.5)
|
Less:
Earnings from equity investments
|
(1.9)
|
(8.8)
|
(6.9)
|
(5.7)
|
|
(23.4)
|
Add:
EBITDA from equity investments
|
19.5
|
23.1
|
21.2
|
19.2
|
|
83.0
|
Scientific Games Attributable
EBITDA
|
$
80.3
|
$
86.7
|
$
83.5
|
$
82.5
|
|
$
333.1
|
|
|
|
|
|
|
|
EBITDA
from equity investments:
|
|
|
|
|
|
|
Earnings
from equity investments
|
$
1.9
|
$
8.8
|
$
6.9
|
$
5.7
|
|
$
23.4
|
Add:
Income tax expense
|
2.2
|
3.8
|
3.0
|
2.5
|
|
11.4
|
Add:
Depreciation and amortization expense
|
11.9
|
9.6
|
10.1
|
10.2
|
|
41.8
|
Add:
Interest expense, net of other
|
3.5
|
0.9
|
1.2
|
0.8
|
|
6.4
|
Scientific Games EBITDA from Equity
Investments
|
$
19.5
|
$
23.1
|
$
21.2
|
$
19.2
|
|
$
83.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to WMS Adjusted
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WMS Net
income
|
$
16.1
|
$
22.1
|
$
22.1
|
$
9.3
|
|
$
69.6
|
Add:
Depreciation
|
17.8
|
19.7
|
21.0
|
23.0
|
|
81.5
|
Add:
Amortization of intangible and other non-current assets
|
7.6
|
6.2
|
8.6
|
9.0
|
|
31.4
|
Add:
Provision for income taxes
|
8.7
|
11.3
|
13.0
|
5.0
|
|
38.0
|
Add:
Interest expense
|
0.4
|
0.4
|
0.4
|
0.7
|
|
1.9
|
Add:
Share-based compensation
|
5.0
|
3.9
|
4.3
|
4.4
|
|
17.6
|
Add: Other
non-cash items
|
2.1
|
1.7
|
0.4
|
1.5
|
|
5.7
|
WMS
Adjusted EBITDA
|
$
57.7
|
$
65.3
|
$
69.8
|
$
52.9
|
|
$
245.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Combined Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scientific
Games Revenue
|
$
239.1
|
$
234.6
|
$
229.3
|
$
227.5
|
|
$
930.4
|
Add: WMS
Revenue
|
162.2
|
176.0
|
195.9
|
159.1
|
|
693.2
|
Equals:
Combined Revenue
|
$
401.3
|
$
410.6
|
$
425.2
|
$
386.6
|
|
$
1,623.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Combined Attributable
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scientific
Games Attributable EBITDA
|
$
80.3
|
$
86.7
|
$
83.5
|
$
82.5
|
|
$
333.1
|
Add: WMS
Adjusted EBITDA
|
57.7
|
65.3
|
69.8
|
52.9
|
|
245.7
|
Equals:
Combined Attributable EBITDA
|
$
138.0
|
$
152.0
|
$
153.3
|
$
135.4
|
|
$
578.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE Scientific Games Corporation