Global Cash Access to acquire Multimedia Games

9 September 2014

LAS VEGAS -- Slot machine maker Multimedia Games, Inc. is being acquired by Global Cash Access Holdings Inc., for $1.2 billion, the companies announced Monday.

The deal, which requires regulatory and shareholder approval, is the most recent buyout in a wave of slot machine industry mergers and consolidations in the past 18 months.

Global Cash Access, which is based in Las Vegas, provides money transaction technology to the casino industry. The company will pay $36.50 a share for Multimedia Games, a 31 percent premium to its Sept. 5 closing price.

Multimedia Games is considered one of the up-and-coming slot machine manufacturers. The company is headquartered in Austin, Texas, with a sales and marketing office in Las Vegas.

Eilers Research founder Todd Eilers suggested to investors that a competing bid for Multimedia Games could be in the offing. He said a breakup fee to end the deal was just $11 million and runs through Oct. 8. Afterward, the figure jumps to $32.5 million.

“Therefore, any competing bids would need to happen within the next 30 days,” Eilers said.

He added that Global Cash Access was a surprising buyer for Multimedia Games because the companies are vastly different. Global Cash Access is a cash access provider while Multimedia provides slot machines.

“We are not surprised to see Multimedia Games get acquired as we have been highlighting for quite some time that they were the most attractive target remaining in a consolidating industry,” Eilers said. “Other than basic general and administrative expenses and public cost synergies, we struggle to see any strategic benefits from the combination of the two companies.”

Global Cash Access provides casinos with ATMs and point-of-sale and debit-card transactions and offers slot-machine ticket redemption and jackpot kiosks. The company processes about 90 million transactions annually, dispensing more than $19 billion in cash. The transaction is expected close next year.

The deal is expected to create about $30 million in synergies and to generate about $800 million in revenue based on the last 12 months ending June 30.

“While today’s announced acquisition follows in line with the broader industry consolidation theme, we cannot say we viewed Global Cash Access as a natural acquirer of Multimedia Games,” Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said. “Although the two companies serve the same customers, we see limited overlap in the products offered.”

The transaction comes less than six weeks after lottery giant Scientific Games Corporation said it was buying Bally Technologies, Inc. for $5.1 billion. Also, Italian lottery company GTECH Holdings said it would buy IGT - International Game Technology for $6.4 billion. Both deals are expected to close next year.

Last year, Bally spent $1.3 billion to acquire SHFL entertainment while Scientific Games bought slot maker WMS Industries for $1.5 billion.

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