Gaming machines maker WMS Industries Inc. is being bought out by rival Scientific Games Corp. for $1.42 billion in cash and debt, a deal highlighting the consolidation in the casino industry driven by gaming demand from emerging markets such as China.
Scientific Games, a company that primarily makes instant lottery tickets and software, is expanding its scope to arcade games, slots and video poker and that the buy-out of WMS, responsible for such game themes based on The Price is Right, The Lord of the Rings and the rock band KISS, will substantially grow the business.
“The acquisition is transformational for Scientific Games, enabling us to offer a complete portfolio of lottery and gaming products and services to both new and existing customers around the world,” Chief Executive Lorne Weil said.
The acquisition would make Scientific Games’s diversified gaming group business its top revenue contributor, up from 15 percent in 2011.
“The transaction demonstrates cash flows as undervalued for both Bally and IGT, and could bring speculation of further consolidation in the casino supplier space,” analyst David Bain of Sterne Agee & Leach wrote in a note.
The deal, which includes debt of $85 million and cash on hand of $55 million, will immediately add to earnings per share and free cash flow. Executives for WMS say they are still working out the details on how the combined company will be run, so there’s no word yet on whether the company’s headquarters will remain in Illinois or if there will be any layoffs.