Gavin Isaacs Worked at Bally and Shufflemaster before Becoming CEO of Scientific Games
Scientific Games has agreed to pay $3.3 billion to buy slot machine maker Bally Technologies. The full deal includes a payment of $5.1 billion, though $1.8 billion of the transaction is being paid to settle Bally’s debts.
The closing shares of Bally on Friday sold for $60.17 per share. Scientific Games agreed to pay $83.30, which is a 38% premium on the stock. The difference will pay off the significant debts Bally Gaming had up to this point.
Gavins Isaacs Knows the Business
As of June 2014, Gavin Isaacs is the new CEO of Scientific Games. Isaacs was once the chief operating officer at Bally Technologies. More recently, he was the CEO of Shufflemaster (SHFL). Last year, Bally bought Shufflemaster for $1.3 billion, so Gavin Isaacs is going to be quite familiar with the new assets his company has purchased.
When news of the sale went live, stock prices for Scientific Games went up 2.8% to $8.78. Scientific Games has a market capitalization of $720 million. which is makes it the highest price-to-earnings ratio, according to Bloomberg. Scientific also has one of the lowest price-to-sale ratios among peers compared by Bloomberg.
Countering Gtech’s Purchase of International Game Technology
The move appears to have been made to counter the purchase of IGT by Gtech SpA (GTK) two weeks ago for $4.7 billion. At the time of the purchase, GTech was the biggest US lottery gaming company, while IGT was the largest slot machine manufacturer. Scientific did the next-best thing to match its rival by purchasing Bally.
About Scientific Games
Scientific Games might not be familiar to many followers of the gaming industry, but it is a massively wealthy gaming company. The company is owned by billionaire investor Ronald Perelman. Scientific organizes lottery gaming systems, terminals and services throughout the United States and globally. The company manufactures instant lottery games, gaming control system, Internet applications, and server-based interactive gaming terminals throughout the USA.
In 2011, Scientific Games’ lottery revenues in the United States alone equalled $56 billion. About 30% of the revenue was directed to government-operated lotteries, but the remaining wealth is immense. In 2012, the company collected $262 billion in revenues worldwide.
Those wondering where these products show up should know that Scientific Games prints out all the Powerball and Mega Millions lottery tickets used in the United States. The company has been in operation since 1973, and its growth has followed the spread and growth of the lottery industry inside the United States. As the multi-state lottery associations grew, so did the revenue of Scientific Games.
About Bally Technologies
Bally Technologies has one of the most confusing company histories you might imagine. The company which owns Bally Technologies Inc. started in 1968 as a technological invention and patent company. By the end of the 1970’s, it had morphed into a gaming machine route company in Nevada. That company was bought 2 or 3 different times, and went through a number of different name changes. In the mid-1990’s, that company bought one division of the defunct Bally Gaming. In 2005, the entire corporation underwent a name change and became Bally Technologies.
Much earlier, Bally Gaming began as pinball machine manufacturers in Chicago. In the 1950’s, Bally became a slot machine operator. It continued as a major manufacturer of slots into the 1990’s, when the company went bankrupt. One wing of the company lent its name to the current company.
Bally Technologies is a major competitor for International Game Technology, though always as a distant second to IGT. Bally has collected a lot of debt in the last few years, so the company needed to be purchased to get itself out of debt. Scientific Games is just the kind of company to do that.
