Global Cash Access to buy Cash Systems

17 June 2008

LAS VEGAS, Nevada -- Casino currency provider Global Cash Access will buy rival Cash Systems for $33 million, the Las Vegas-based companies announced Monday.

The value of the deal includes $21 million that Global Cash Access will pay to holders of Cash Systems' outstanding promissory notes and warrants. Cash Systems shareholders will receive 50 cents per share in cash, a 4 percent premium over Friday's closing price of 48 cents.

The transaction, which was approved by the boards of directors of both companies and is expected to close by the end of next month, might be bittersweet to shareholders of Cash Systems.

On St. Patrick's Day, the company said it retained Deutsche Bank to explore strategic alternatives. Cash Systems shares closed at $2.21 on March 17, but a week later, shares fell to 46 cents. The company was trading at a 52-week high of $7.46 a year ago.

Global Cash Access and Cash Systems provide cash to both casino and retail customers. For a fee, the companies handle transactions such as automated teller machine withdrawals, credit card cash advances and check cashing. Global Cash Access will add about 120 new customers through the acquisition.

"This acquisition provides us with unique synergies within the gaming market and continues (the company's) product innovation efforts, while providing the growth and cross-selling potential that our stockholders expect," Global Cash Access President and CEO Scott Betts said in a statement.

Global Cash Access, which has a market capitalization of $566.7 million, closed at $7.34 in trading Monday on the New York Stock Exchange, down 14 cents or 1.87 percent. The company said its net income in the quarter that ended March 31 was $1.75 million, almost 80 percent below its profits reported in the same quarter a year ago.

Global Cash Access is also facing potential shareholder class action lawsuits over allegations the company artificially inflated its stock price. Global Cash Access has approximately 1,100 casino and nongaming customers throughout the U.S., Canada, Europe, Caribbean and Asia. Cash Systems suffered a $4.3 million net loss in the fourth quarter that ended Dec. 31, saying $4.1 million was related to returned checks in the check guarantee business. The company has devices predominantly in the American Indian gaming market.

Cash Systems' management team is well-connected and reads like a gaming industry all-star squad. Chairman and Chief Executive Officer Mike Rumbolz, a former chairman of the Gaming Control Board, ran casinos for Donald Trump and the former Circus Circus Enterprises.

Board members include University of Nevada, Las Vegas Gaming Institute executive director Patricia Becker, former MGM Grand executive Patrick Cruzen and retired Boyd Gaming Corp. President Don Snyder.

Rumbolz said the transaction was a good opportunity for Cash Systems shareholders.

"(Global Cash Access) will lend scale and resources to continue to drive innovative products in the market," Rumbolz said.

Because the companies provide cash-access services and have no gaming function, neither is required to be licensed by Nevada, so state gaming regulators will not have to approve the deal.

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