A $3.3 billion merger between Scientific Games and Bally Technologies will make the newly combined gambling equipment company one of two giants in its industry.
The merger, announced today, totals $5.1 billion in value when including about $1.8 billion in Bally debt. Scientific Games plans to pay $83.30 per share for the Las Vegas-based slot machine maker — 38 percent higher than Bally’s $60.17 closing price on Thursday.
It comes on the heels of a different major merger announced just a few weeks ago between International Game Technology, another Las Vegas company that manufactures gaming machines, and Italian lottery company Gtech. That deal was valued at $6.4 billion.
The two merged companies will greatly outsize their competitors.
“They will be significantly bigger,” said Robert Shore, an analyst with Union Gaming Group. “They will be two behemoths in the space.”
The Bally merger wasn’t a big surprise to Union Gaming. In a note dated Friday, Union Gaming said the proximity of Bally merger to the previous IGT merger was not a coincidence — the analysts had written earlier that more mergers were likely.
Factors driving the Bally merger include a sluggish domestic gaming market and a crowded field of gaming technology providers, said Todd Eilers, the director of research at Eilers Research in Southern California.
“You’ve got a large number of suppliers that are looking for ways to grow, and with the soft domestic market, there’s international expansion or consolidation and acquisition,” Eilers said. “So you’re seeing a little bit of both.”
The transaction, which has already been approved by the boards from both companies, still has to get approval from shareholders at Bally. But it’s expected to close early next year.
This deal is not the first recent merger for either company. Last year, Scientific Games bought WMS Industries Inc., a gaming company, in a $1.42 billion deal. And Bally acquired the casino device company SHFL Entertainment a deal that, including debt, was valued at $1.3 billion.
Interestingly, Scientific Games CEO Gavin Isaacs used to be the chief executive at Bally. He moved to SHFL to head that company before transitioning to his current position at Scientific Games this year.
Bally shares went up more than 29 percent to $77.70 while Scientific Gaming went up 2.8 percent to $8.78 at the close of Friday trading. The Standard & Poor’s 500 index was down 0.29 percent.
David Schwartz, director of UNLV’s Center for Gaming Research, said the merger could go either way from the perspective of casinos purchasing equipment.
“The would have one less place to go, so they would have one less vendor for a big order,” Schwartz said, but “(the merged company) may be able to deliver cost savings and give them products at a lower price point.”