Electronic gaming machine manufacturer Baly Technologies Inc. stated that it will purchase gaming equipment company SHFL Entertainment Inc. for around $1.3 billion in order to gain access to the thriving industry across Asia and Australia.
After the announcement, Baly shares climbed 9 percent to a record high as investors bet on the move. The acquisition will give Baly global reach and offerings that set them apart from competitors.
Up until now Baly has focused most of their efforts on the slots market, but SHFL brings electronic games, and mechanical devices needed by gaming resorts. The marriage will give Baly a complete lineup likely to significantly increase the average purchase from the company.
With a stronghold in Asia, the world’s fastest growing gaming market, Baly is poised to grow substantially from the buyout which more than justifies the 24% premium that they offered over the share value of SHFL.
“From a strategic standpoint, the partnership makes perfect sense. The companies complement each other well, and the combination of patents, largely in noncompeting segments, make for a powerhouse of a gaming equipment provider.” - Michael Webber, ChanPark International.
Around Asia, gaming is growing rapidly, as is the electronic segment of that market. Taiwan is opening its doors to the industry, and South Korea will follow soon behind. The Philippines is developing massive resorts, and smaller destinations scattered around the region make for a very large and rapidly growing market. While the United States would be expected to have the largest market, SHFL sold more to Asia and Australia in 2012 than the United States. 36% of SHFL’s total sales in 2012 were to Australia, and Baly previously had little to no exposure to it. 81% of Baly’s revenue is from the US, so access to SHFL’s Asian and Australian clients is expected to significantly increase the global sales of the Baly product lineup.
Baly, founded in Chicago as a pinball manufacturer almost a century ago, expects the deal to add to its earnings per share and free cash flow within a year of closing.
The acquisition, which includes the assumption of $8 million of debt, is expected to close by the second quarter of 2014.