Aristocrat buys Video Gaming Technologies for $US1.3b

Aristocrat says buying Video Gaming Technologies will allow it to accelerate US revenue growth.Gaming machine maker Aristocrat will buy US  group Video Gaming Technologies in a $US1.3 billion deal designed to give Aristocrat a greater presence in the key tribal casino market in North America.

The cash deal, which will also see Aristocrat refinance its debt facilities into a new $1.4 billion debt package, is expected to be completed by the end of the first half of 2015. Aristocrat says it will provide earnings per share growth in the low-to-mid teens.

“The strategic and financial benefits are compelling for Aristocrat shareholders,” chief executive Jamie Odell said in a statement to the ASX.

“VGT has a complementary product offering and provides a unique opportunity to accelerate our growth in the US recurring revenue segment, which has for some time been an important strategic objective.”

VGT is one of America’s largest privately owned gaming machine players, and concentrates on what are known as Class II gaming machines. These are based on a bingo-style game, as opposed to standard gaming machines (known in America as Class III games), which are based on random number generators.

The deal will take Aristocrat’s gaming operations from an installed base from approximately 8200 units to 28,400 units and increase the percentage of Aristocrat’s earning defined as “recurring” from 15 per cent to 35 per cent.

It also increases revenue from the North American market from 48 per cent to 60 per cent.

“We have consistently called out growing in the North American market as our highest strategic priority,” Mr Odell said during a call to investors.

In addition to the new debt arrangements, the company plans to conduct a $375 million placement to institutional investors and a $30 million share offer to members of the Ainsworth family, who are amongst the group’s largest shareholders. Retail shareholders will be also be able to buy up to $15,000 in new shares.

The deal will see VGT founder Jon Yarbrough walk away from a business that he started in 1991 and has run, according to Mr Odell, without a board or business partners throughout.

Mr Odell said Mr Yarbrough was likely to pursue his growing philanthropic interests.

“John and I have formed a very good relationship. John’s built a fantastic business and he now believes it’s time to pass it on,” he said.

Mr Yarbrough will stay on as an adviser after the deal and Mr Odell says Aristocrat has put in place “mechanics” to retain key VGT staff members.

“We’ve spent time with the current management team and we are very impressed,” Mr Odell said.

He said VGT will run as a separate division and Aristocrat will be “light in terms of our touch” in its oversight of VGT.

This story Administrator ready to work first appeared on Nanjing Night Net.

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