Combination Will Expand Global Capabilities to
Deliver Innovative Gaming, Lottery and Social Content, World-Class
Systems Solutions and Value-added Services Across Multiple
Distribution Channels and Platforms
Transaction Expected to be Immediately
Accretive to Scientific Games’ EPS and Cash Flow
$220 Million in Annual Cost Synergies and $25
Million in Annual Capital Expenditure Savings Anticipated to be
Realized by End of Second Year After Closing
Conference Call Today at 8:30 am EDT, (866)
318-8617
Scientific Games Corporation (Nasdaq: SGMS) (“Scientific Games”)
and Bally Technologies, Inc. (NYSE: BYI) (“Bally”) today announced
that the companies have entered into a definitive merger agreement
whereby Scientific Games has agreed to acquire all of the
outstanding Bally common stock for $83.30 in cash per share, which
represents a 38 percent premium to Bally’s closing stock price on
July 31, 2014. The aggregate transaction value is approximately
$5.1 billion, including the refinancing of approximately $1.8
billion of existing Bally net debt. The transaction was unanimously
approved by the boards of directors of the two companies.
“The acquisition of Bally provides us with a unique opportunity
to combine two exceptional companies with long track records of
creating leading-edge games and gaming technology products for
players and delivering innovative solutions to our customers,” said
Gavin Isaacs, Scientific Games’ President and Chief Executive
Officer. “With leading gaming, lottery, and interactive content,
world-class systems capabilities and table game offerings, we
believe that the combined company will be uniquely positioned as a
strategic partner for gaming and lottery operators, offering a
highly diversified suite of value-enhancing products and services
across multiple worldwide distribution channels and platforms.”
“Having worked side-by-side with the talented teams at Bally and
more recently Scientific Games, I am confident this combination
brings together best-of-breed cultures and is occurring at a truly
opportune time as both companies are committed to bringing the
highest value products and services to customers,” continued Mr.
Isaacs. “The combined company will feature world-class research and
development capabilities, an expanded base of recurring revenues
and greater worldwide penetration in key geographies, including the
AustralAsia region. 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 with Scientific Games will benefit our
customers and shareholders,” said Richard Haddrill, Bally’s Chief
Executive Officer. “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.”
Expanded Portfolio and Improved Operating
Efficiencies
The transaction would expand Scientific Games’ portfolio of
products and solutions to include leading casino management systems
and table products, including automatic shufflers, proprietary
table games and electronic table systems. It would also expand the
range of Scientific Games’ social and real-money iGaming and
iLottery products and services. This expanded portfolio is expected
to position Scientific Games to better cross-utilize content and
technology across the lottery, gaming and interactive sectors to
propel future growth.
The combined company is expected to have world-class global
sourcing, production, engineering and product development
capabilities, as well as a large installed global base of diverse
recurring revenue products and services. Scientific Games and Bally
generated combined revenue of approximately $3.0 billion in the
12-month period ended March 31, 2014.
Scientific Games expects to achieve the anticipated $220 million
of cost synergies and $25 million of capital expenditure savings by
consolidating operations and generating efficiencies in the areas
of manufacturing, engineering, field and customer service and
administrative operations. Scientific Games anticipates incurring
$75 million of costs to achieve the cost synergies and $40 million
in capital costs to complete the integration of the companies. In
addition, the combined company is expected to benefit from
accelerated utilization of various tax attributes against
U.S.-based pre-tax income.
Transaction Terms
Scientific Games would acquire all of the outstanding shares of
Bally for $83.30 per share in cash, for a total transaction value
of approximately $5.1 billion, including net debt of approximately
$1.8 billion. The acquisition would be financed with debt and cash
on hand and Scientific Games has obtained committed debt financing
for the transaction, which is not subject to a financing
contingency.
The acquisition is subject to customary closing conditions,
including receipt of Bally shareholder approval and antitrust and
gaming regulatory approvals, and is currently expected to be
completed in early 2015. Scientific Games and Bally are both
licensed in more than 300 gaming jurisdictions worldwide, which is
expected to help facilitate obtaining the required gaming
regulatory approvals.
Upon closing of the transaction, Mr. Isaacs will continue as
President and Chief Executive Officer of Scientific Games, and it
is anticipated that Mr. Haddrill and David Robbins, Chairman of the
Board of Directors of Bally, will join the board of directors of
Scientific Games, with Mr. Haddrill anticipated to serve as Vice
Chairman.
Financial and Legal Advisory
BofA Merrill Lynch, Deutsche Bank Securities Inc. and J.P.
Morgan served as the financial advisors to Scientific Games and
Cravath, Swaine & Moore LLP served as the legal advisor to
Scientific Games for the transaction. BofA Merrill Lynch, J.P.
Morgan and Deutsche Bank Securities Inc. provided the committed
debt financing for the transaction, and Latham & Watkins LLP
served as the legal advisor to Scientific Games for such
financing.
Macquarie Capital served as lead financial advisor and Groton
Partners served as co-financial advisor to Bally and Skadden, Arps,
Slate, Meagher & Flom LLP served as the legal advisor to
Bally.
Conference Call Details
Scientific Games management is hosting a conference call today,
August 1, at 8:30 am EDT to review the proposed transaction. To
access the call live via a listen-only webcast, please visit
www.scientificgames.com and click on the webcast link under the
Investors section. To access the call by telephone, please dial
(866) 318-8617 (U.S. and Canada) or +1 (617) 399-5136
(international). The conference ID is SGMS. A replay of the webcast
will be archived in the Investors section on our website.
A presentation that will be reviewed on the call will be
available in the Investors section on the Scientific Games website
prior to the call. A replay of the webcast and accompanying
presentation will be archived in the Investors section on the
Scientific Games website.
About Scientific Games
Scientific Games Corporation (NASDAQ: SGMS) is a leading
developer of technology-based products and services and associated
content for worldwide gaming and lottery markets. The Company’s
portfolio includes instant and draw-based lottery games; electronic
gaming machines and game content; server-based lottery and gaming
systems; sports betting technology; loyalty and rewards programs;
and social, mobile and interactive content and services. For more
information, please visit: www.scientificgames.com.
About Bally Technologies
Founded in 1932, Bally Technologies (NYSE: BYI) provides the
global gaming industry with innovative games, table game products,
systems, mobile, and iGaming solutions that drive revenue and
provide operating efficiencies for gaming operators. For more
information, please visit http://www.ballytech.com. Connect with
Bally on Facebook, Twitter, YouTube, LinkedIn, and Pinterest.
Forward-Looking Statements
This press release includes “forward-looking statements” within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995. 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,” “plan,”
“continue,” “believe,” “expect,” “anticipate,” “estimate,”
“should,” “could,” “potential,” “opportunity,” or similar
terminology. These statements are based upon management’s current
expectations, beliefs, assumptions and estimates and are not
guarantees of timing, 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 company or the price of Scientific Games’
or Bally’s stock. These forward-looking statements involve certain
risks and uncertainties and other factors that could cause actual
results to differ materially from those indicated in such
forward-looking statements, including but not limited to:
uncertainties as to the timing of the consummation of the proposed
transaction and the ability of the parties to consummate the
proposed transaction; the satisfaction of the conditions precedent
to consummation of the proposed transaction, including the approval
of Bally’s stockholders; the ability to obtain required regulatory
and gaming approvals at all or in a timely manner; the ability to
obtain the debt financing necessary to consummate the proposed
transaction; litigation related to the proposed transaction;
disruption of Bally’s or Scientific Games’ current plans and
operations as a result of the proposed transaction; the ability of
Bally or Scientific Games to retain and hire key personnel;
competitive responses to the proposed transaction; unexpected
costs, charges or expenses resulting from the proposed transaction;
the ability of Scientific Games to successfully integrate Bally’s
operations, product lines and technology; the ability of Scientific
Games to implement its plans, forecasts and other expectations with
respect to Bally’s business after the completion of the transaction
and realize additional opportunities for growth and innovation; the
ability of Scientific Games to realize the anticipated synergies
from the proposed transaction in the anticipated amounts or within
the anticipated timeframes or costs expectations or at all; the
ability to maintain relationships with Scientific Games’ and
Bally’s respective employees, customers, other business partners
and governmental authorities; and the other risks, uncertainties
and important factors contained and identified (including under the
heading “Risk Factors”) in Scientific Games’ and Bally’s filings
with the Securities and Exchange Commission (the “SEC”), such as
their respective Quarterly Reports on Form 10-Q, Annual Reports on
Form 10-K and Current Reports on Form 8-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 and, except for
Scientific Games’ and Bally’s ongoing obligations under U.S.
federal securities laws, neither Scientific Games nor Bally
undertakes any obligation to update any forward-looking statements
whether as a result of new information, future events or otherwise.
Bally is responsible for the information in this press release
concerning Bally and Scientific Games is responsible for the
information in this release concerning Scientific Games. Readers
are cautioned not to place undue reliance on any of these
forward-looking statements.
Non-GAAP Financial Measures
Combined revenue as used herein is a non-GAAP measurement that
is presented herein as a supplemental disclosure. As used herein,
combined revenue reflects the arithmetic sum of Scientific Games’
pro forma revenue (giving effect to the acquisition of WMS
Industries Inc.) and Bally’s pro forma revenue (giving effect to
the acquisition of SHFL entertainment, Inc. and Dragonplay Ltd.)
for the trailing 12-month period ended March 31, 2014. As used
herein, combined revenue does not represent a “pro forma” amount
determined in accordance with the SEC’s rules and regulations,
including Article 11 of Regulation S-X, does not reflect any pro
forma adjustments resulting from the proposed transaction, and
should not be taken to represent how the companies would have
performed on a historical basis had the acquired operations been
included in the period presented, or how the companies will perform
in any future period. This non-GAAP financial measure, as well as
the other information in this press release, should be read in
conjunction with Scientific Games’ and Bally’s financial statements
filed with the SEC.
Additional Information and Where to Find It
This communication is being made in respect of the proposed
transaction involving Bally and Scientific Games. Bally intends to
file with the SEC a proxy statement in connection with the proposed
transaction with Scientific Games. Bally also intends to file with
the SEC other documents regarding the proposed transaction. The
definitive proxy statement will be sent or given to the
stockholders of Bally and will contain important information about
the proposed transaction and related matters. BALLY’S SECURITY
HOLDERS ARE URGED TO READ THE PROXY STATEMENT REGARDING THE
PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS CAREFULLY AND
IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The
proxy statement and other relevant materials (when they become
available), and any other documents filed by Bally with the SEC,
may be obtained free of charge at the SEC’s website, at
www.sec.gov. In addition, security holders of Bally will be able to
obtain free copies of the proxy statement from Bally by contacting
Investor Relations by mail at Attn: Investor Relations, Bally
Technologies, 6650 El Camino Road, Las Vegas, NV 89118.
Participants in the Solicitation
Scientific Games and Bally 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, 2013 filed with the
SEC on March 17, 2014 and the proxy statement for Scientific Games’
2014 annual meeting of stockholders, filed with the SEC on April
30, 2014. Information about Bally’s directors and executive
officers is included in Bally’s Annual Report on Form 10-K for the
fiscal year ended June 30, 2013 filed with the SEC on August 28,
2013 and in the proxy statement for Bally’s 2013 annual meeting of
stockholders, filed with the SEC on October 28, 2013. Additional
information regarding these persons and their interests in the
merger will be included in the proxy statement relating to the
proposed merger when it is filed with the SEC. These documents can
be obtained free of charge from the sources indicated above.
Investor Relations:Scientific Games:Bill Pfund, +1
847-785-3167Vice President, Investor
Relationsbill.pfund@scientificgames.comorBally:Mike Carlotti, +1
702-532-7995Vice President of Treasury and Investor
Relationsmcarlotti@ballytech.comorMedia Relations:Scientific
Games:Mollie Cole, +1 773-961-1194Director, Corporate
Communicationsmollie.cole@scientificgames.comorBally:Laura
Olson-Reyes, +1 702-532-7742Senior Director, Marketing &
Corporate Communicationslolson-reyes@ballytech.comorBally:Mike
Trask, +1 702-532-7451Senior Manager, Corporate
Communicationsmtrask@ballytech.com
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