Attendees visit a Bally Technologies Inc. booth in the Las Vegas Convention Center. (Jacob Kepler/Getty)
Casino and lottery game maker Scientific Games Corporation said on Friday it has agreed to buy Bally Technologies, Inc. for $5.1 billion in cash and debt in a deal that continues a streak of consolidations in the gaming industry.
As part of the deal, New York-based Scientific Games will pay $83.30 in cash for each of Bally’s outstanding shares—a 38 percent premium over the Las Vegas-based game maker’s closing price on Thursday. The deal will be financed with $3.3 billion in cash and $1.8 billion in assumed debt, Scientific Games said in news release.
The boards of directors from both companies have unanimously approved the transaction, which is expected to close in early 2015 and is subject to Bally shareholder, antitrust and gaming regulatory approvals.
Scientific Games sells lottery and casino technology and content to operators, while Bally sells casino-management systems, table games and electronic game table systems.
The companies generated combined revenues of approximately $3 billion in the year ended March 31, 2014. Together, they hold licenses in more than 300 gaming jurisdictions worldwide, according to Scientific Games.
Cravath, Swaine & Moore and Latham & Watkins represented Scientific Games on the deal, while Skadden, Arps, Slate, Meagher & Flom advised Bally.
Gavin Isaacs, Scientific Games’ president and chief executive officer, said in a statement, “The combined company will feature world-class research and development capabilities, an expanded base of recurring revenues and greater worldwide penetration in key geographies, including the AustralAsia region.”
The merged company is expected to realize $220 million in cost-savings and $25 million of annual capital expenditure savings by the end of the second year following the transaction’s closing, while adding immediately to earnings per share and cash flow.
Richard Haddrill, Bally’s chief executive officer, said that the increased scale, geographic diversity and product development capabilities from the combination “will create a new runway of growth opportunities through new products and a comprehensive portfolio of customer-focused solutions.”
Bally was awarded Las Vegas’ first interactive gaming license in 2012, according to the Las Vegas Review Journal.
The Cravath team for Scientific Games was led by corporate partners George Schoen and Robert Townsend III. Also on the deal were real estate practice area attorney Gary Eisenman, antitrust partner Yonatan Even, executive compensation partner Eric Hilfers, intellectual property partner David Kappos, tax partner Michael Schler, antitrust partner Christine Varney and environmental senior attorney Annmarie Terraciano.
Cravath associates on the matter included Matthew Bobby, Allison Davido, Jonathan Davis, Caitlin Fitzpatrick, Pierre Gemson, Jarrett Hoffman, Benjamin Landry, Edmund Mokhtarian, Catalina Parkinson, James Pickel Jr. and Stephen Severo.
This is the first publicly announced transaction on which Cravath has advised Scientific Games, a spokeswoman for the firm said.
Latham & Watkins advised Scientific Games on the financing aspects of the merger, with a corporate team led by partners Senet Bischoff and Marc Jaffe. Partners Scott Forchheimer, Manu Gayatrinath and Michéle Penzer provided banking advice, with help from associates Emily Corbi, Jane Hogan and Katherine Putnam. Latham & Watkins regularly represents Scientific Games in its financing transactions and has been involved in multiple bank and bond matters in the last five years, a spokeswoman said.
The Skadden team for Bally was led by mergers and acquisition partners Howard Ellin and Ann Beth Stebbins. Antitrust partners Clifford Aronson and Alec Chang, intellectual property partner Bruce Goldner, banking counsel M. Janine Jjingo, derivatives counsel Justin Michael, executive compensation partner Regina Olshan, tax partner David Rievman, banking partner Stephanie Teicher and corporate finance partner Michael Zeidel also advised.
Skadden associates on the matter include Trevor Allen, Tim Cruickshank, Peyton Gully, Kyle Hatton, Shalom Huber, Matthew Nemeroff, Rebecca Rodal, Travis Scher, Kyle Seifried and Michael Sheerin.
Skadden advised Las Vegas-based SHFL Entertainment Inc. in July 2013 when it was bought by Bally for $1.3 billion. (Gibson, Dunn & Crutcher advised Bally on that deal.) Isaacs, who has served as CEO of Scientific Games since June, was formerly CEO of SHFL and before that was the chief operating officer at Bally, according to Bloomberg.
Skadden has had a role in four of five major deals in the casino and gaming industry in the past 18 months, a spokeswoman for the firm said. It represented WMS Industries Inc., an electronic gaming machine and video-lottery terminal manufacturer, in its $1.5 billion sale to Scientific Games Corporation in February 2013. It also represented Video Gaming Technologies Inc. in its $1.3 billion sale to Aristocrat Leisure Ltd. of Australia in early July.