Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of WMS Industries (NYSE: WMS ) soared a whopping 52% today, after instant-win lotto ticket company Scientific Games (NASDAQ: SGMS ) agreed to buy the gaming equipment specialist for about $1.4 billion .
So what: The deal, which happens to be the sector's largest in nearly two years, values WMS at $26 per share, and represents a 59% premium to its closing price on Wednesday. Scientific is making the move to expand its product portfolio for casinos and, judging by its own stock's 10% jump today, Mr. Market is thrilled with the price it's paying to do it.
Now what: The transaction is expected to close by the end of 2013, and be immediately accretive to Scientific's EPS and free cash flow. According to Scientific CFO Jeffrey Lipkin:
This combination will diversify Scientific Games' revenue base, expand margins and propel future growth opportunities. Importantly, as we realize efficiencies from our increased size and scope, we should be able to deliver meaningful value to shareholders through the deal's immediate earnings per share accretion, significantly improved free cash flow and anticipated synergies.
So, while WMS' upside is limited at this point, Scientific's newly-bolstered growth and cost-cutting prospects might be worth betting on.
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