Scientific Games to Buy WMS for $1.5 Billion

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On Thursday, Scientific Games (NASDAQ: SGMS  ) announced it has agreed to purchase all outstanding shares of WMS Industries (UNKNOWN: WMS.DL  ) for $26 per share, cash. The total stated value of the acquisition is $1.5 billion. Both companies' boards have voted unanimously to approve the combination.

Scientific Games is a leading supplier of "instant lottery" tickets, lottery and video gaming systems, and server-based gaming. WMS supplies gaming machines and interactive gaming content. Together, Scientific Games Chairman and Chief Executive Officer A. Lorne Weil says the companies will "combine our game content, technology, operational capabilities and respective geographic footprints to create an enterprise poised to capitalize on significant growth opportunities around the globe."

The combined companies produced about $1.6 billion in revenues over the past year, and generated earnings before interest, taxes, depreciation, and amortization of $579 million -- but only about $24 million in net profit. Scientific Games believes it can improve upon these numbers through "synergies" permitted by the combination, which is expected to close by the end of 2013.

WMS shares are up 51.2% on the news, at $24.75, still below Scientific's offer price. Scientific's own shares are also up -- 16%, to $10.36.

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  • Report this Comment On February 04, 2013, at 11:00 AM, frankvanj wrote:

    As announced recently, Scientific Games (SGMS) agreed to buy slot machine manufacturer WMS Industries (WMS) for about $1.5 billion. However, nowhere in this story did they make mention of a giant elephant in the room: WMS is the primary defendant in a huge, pending lawsuit. Well over 25% of WMS' revenue comes from group play slot machines- the exact slot machines that are the target of a lawsuit being funded by MGT Capital.

    Note that this lawsuit also includes historical damages, trebled, and ongoing royalties and/or injunctions. There is a massive amount of money at stake here. If WMS loses, Scientific Games could be drawn into liability if they acquire the company. Likewise, Scientific Games might suddenly discover this lawsuit and decide that they don't want WMS after all. Or any other number of complications.

    This is a big deal, and a huge positive for MGT Capital. It validates (with a real takeover offer) the value of group play slot machines. WMS has succeeded with group play slot machines, and they have allegedly done so by infringing upon MGT's patents. They will have to pay, and now they're going to have to go to the confessional with Scientific Games. In any case, this announcement simply means more money for MGT and more exposure for this overlooked lawsuit.

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