Global Cash CEO says Multimedia Games deal a class apart

3 October 2014

LAS VEGAS -- GCA - Global Cash Access CEO Ram Chary believes some opinions in the investment community might be off a bit when it concerns the company’s planned $1.2 billion acquisition of slot machine manufacturer Multimedia Games, Inc.

The deal is not like any of the other high-profile gaming equipment-sector consolidations discussed this week at the Global Gaming Expo (G2E) 2014.

Chary, CEO of the Las Vegas-based company that provides money transaction technology to the casino industry for eight months, spent much of G2E explaining the deal to analysts.

For Global Cash Access, the purchase of a slot machine maker allows the company to expand beyond its current business model and to provide different product lines to its casinos customers. Chary said the merger would also open more paths for Multimedia Games to enter new jurisdictions.

“It’s about combining two complementary businesses and bringing them together to provide more services to our clients,” Chary said. “We’re combining two companies with best-in-class products.”

Global Cash Access has more than 300 gaming licenses worldwide, a figure similar to slot machine giants Bally Technologies, Inc. and IGT - International Game Technology. Multimedia Games has fewer than 100 licenses and was itself licensed in Nevada in late 2012.

“We will help them break into markets quicker because of our relationships,” Chary said. “This is a great growth opportunity for Multimedia.”

Chary said Global Cash Access saw Multimedia Games as the best option of several slot machine businesses it looked at.

The slot machine maker, headquartered in Austin, Texas, with a sales and marketing office in Las Vegas, is considered one of the gaming industry’s top turnaround stories of the past few years. The company was close to being shut down in 2010, but refocused and expanded across the U.S.

Multimedia Games took casino floor space away from the big companies — IGT, Bally, WMS Industries Incorporated — while its share price increased. Multimedia Games this year spent $13 million for PokerTek, an electronic table game company.

Multimedia Games stock price is 10 times what it was in 2010.

Wall Street analysts pegged the company as a takeover target following this summer’s two major merger announcements.

Italian lottery giant GTECH Holdings said July 15 it was buying IGT for $6.4 billion.

On Aug. 1, Scientific Games Corporation, the New York-based lottery provider that bought WMS Industries last year for $1.5 billion, said it would spend $5.1 billion for Bally. Last year, Bally bought gambling equipment manufacturer SHFL entertainment for $1.3 billion.

The surprise to Wall Street was that Multimedia Games’ buyer was Global Cash Access. Analysts said the slot machine company mergers will provide more than $600 million in cost savings, often described as synergies.

Chary said that while the deal will create $30 million in synergies, “The other transactions in the space are very different. They are focused on synergies and driving out synergy dollars. That’s not what this transaction is about.”

Multimedia Games CEO Patrick Ramsey said it is “still to be determined” if he will stay on once the transaction closes. Chary said Multimedia Games’ manufacturing and production facility in Austin would remain, but the companies would combine offices in Las Vegas.

“They are a very well-run company,” Chary said. “Patrick has done an excellent job with the management team.”

Multimedia Games stockholders will receive $36.50 per share in cash from Global Cash Access, a 31 percent premium to the Sept. 5 closing price.

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.

Chary said the combined company would have generated roughly $800 million in revenue based on the last 12 months ending June 30. The transaction is expected close early next year.

The first hurdle to clear comes Wednesday. If another buyer surfaces, it would have to pay Global Cash Access an $11 million breakup fee. After Wednesday, that fee jumps to $32.5 million.

Chary said the breakup fee was “just part of the process.”

Copyright GamingWire. All rights reserved.

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