Alliance Gaming Announces Definitive Agreement to Acquire Sierra Design Group
November 11 2003 - 7:00AM
PR Newswire (US)
Alliance Gaming Announces Definitive Agreement to Acquire Sierra
Design Group Marks Strategic Entry Into Class II Markets, Further
Develops VLT and Central Determination Product Lines and
Significantly Grows Systems Business LAS VEGAS, Nov. 11
/PRNewswire-FirstCall/ -- Alliance Gaming Corp. announced today
that it has signed a definitive agreement to acquire privately-held
Sierra Design Group (SDG), a leading supplier of Class II and Class
III gaming devices, systems and technology. Under terms of the
agreement, Alliance Gaming will purchase 100 percent of the
outstanding shares of SDG for approximately $45 million of
consideration consisting of $27 million of cash and 736,000 shares
of Alliance Gaming Common Stock (valued at $18 million) paid at
closing and approximately $95 million of contingent consideration
payable in equal portions of cash and stock payable over the three
years following the closing upon SDG achieving certain financial
objectives. The acquisition, which is subject to regulatory
approvals and certain other customary closing conditions, is
expected to close in the first half of calendar 2004. "The
acquisition of Sierra Design Group makes a powerful statement about
Alliance Gaming's plans for future growth while giving us an
immediate impact in new and emerging markets," said Robert
Miodunski, President and Chief Executive Officer of Alliance
Gaming. "SDG has become a strong player in the gaming industry in a
short period of time through its customer relationships, innovative
products and an overriding commitment to cutting-edge technology,"
Miodunski added. "Bally Gaming and Systems offers a world-class
combination of games and systems and adding SDG's products and
technology to our portfolio of products takes our company to a new
level of strength within our industry. With the emerging VLT and
'racino' markets poised for growth both domestically and
internationally, we are now favorably positioned to be a
significant provider of technology to these markets." The
acquisition of SDG will give Alliance Gaming an increased presence
in the expanding Class II markets such as Oklahoma, Florida and
Alabama, along with approximately 9,300 centrally-determined Class
III games operating in the state of Washington. In these markets,
SDG offers its products either for sale, lease or participation in
addition to a daily license fee per device. Alliance's Bally Gaming
and Systems business unit and SDG were both among the four
companies selected to provide machines to racetrack facilities in
New York State under a revenue-share arrangement. The first of
eight tracks with VLTs is scheduled to open before the end of the
calendar year and the market is expected to grow to a total of more
than 14,000 machines. SDG also operates machines in traditional
Class III casino markets such as Nevada and Connecticut on a
participation basis. SDG's initial offering, the highly successful
Raining Diamonds(TM) slot machine, dispenses genuine diamond
jewelry as the top jackpot award. At the recent Global Gaming Expo,
SDG debuted a new bonusing concept with its Auction Fever(TM) slot
machine that allows all of the players on a linked bank of machines
to receive additional bonus payouts when one player initiates the
bonus round. "SDG has created new solutions for the network gaming
systems which provide games and integrated system products from a
wide variety of gaming manufacturers that maximize revenue
opportunities for gaming operators in VLT, Class II and Class III
markets," said Bob Luciano, SDG's President. "Bally Systems has
created the most comprehensive gaming network solutions for the
traditional gaming markets, sharing a similar vision to create the
next generation solutions for the gaming floors of tomorrow.
Together we will forge new opportunities in gaming using the proven
technology and market development strengths of SDG combined with
the industry leadership and market share of Bally Systems and the
rich depth and history of Bally Gaming." Depending on the closing
date, this transaction is expected to be up to $0.10 per share
dilutive to Alliance Gaming's fiscal year 2004 results, accretive
to fiscal year 2005 earnings by at least $0.10 to $0.15 per share
on incremental revenues of approximately $100 million, and
accretive to fiscal year 2006 earnings by at least $0.18 to $0.23
per share on incremental revenues of approximately $120 million. In
a separate transaction, Alliance Gaming loaned SDG $51 million to
be utilized by SDG to repay certain long-term debt, and Alliance
Gaming agreed to provide a $24 million revolving credit facility to
SDG for working capital purposes to facilitate its continued
growth; these loans are secured by certain assets of SDG. In order
to provide the liquidity for these loans, Alliance Gaming obtained
a $75 million increase in its Term Loan, which was funded on Nov.
10, 2003. Founded in 1996 by Mr. Luciano, SDG employs more than 370
employees, dominated by hardware and software engineers, and is
headquartered in Reno, Nev. SDG has field offices in each of the
markets in which it operates, and has a design center office in Las
Vegas. CIBC World Markets Corp. acted as exclusive financial
advisor to SDG. Alliance Gaming is a diversified gaming company
with headquarters in Las Vegas. The Company is engaged in the
design, manufacture, operation and distribution of advanced gaming
devices and systems worldwide, and is the nation's largest gaming
machine route operator and operates two casinos. Additional
information about the Company can be found at
http://www.alliancegaming.com/. This news release may contain
"forward-looking" statements within the meaning of the Securities
Act of 1933, as amended, and is subject to the safe harbor created
thereby. Such information involves important risks and
uncertainties that could significantly affect the results in the
future and, accordingly, such results may differ from those
expressed in any forward-looking statements. Future operating
results may be adversely affected as a result of a number of risks
that are detailed from time to time in the company's filings with
the Securities and Exchange Commission. For further information
please contact: Investor and Media, Robert L. Saxton of Alliance
Gaming, +1-702-270-7600. DATASOURCE: Alliance Gaming Corp. CONTACT:
investors and media, Robert L. Saxton of Alliance Gaming,
+1-702-270-7600 Web site: http://www.alliancegaming.com/
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