The Scientific Games Deal with Bally Technologies

The merger between Scientific Games (SGMS) and Bally Technologies that was completed on 21 November 2014 marks the latest chapter in a history of gaming devices that dates back more than 80 years. Bally Manufacturing, as it was known when the company was founded in 1932, originally produced pinball machines.

Slot machines were added to the product line in 1936, which gives Bally the distinction of being the world’s oldest slot-machine designer still in business. Another record was set when Bally listed on the New York Stock Exchange in 1975, becoming the first gaming company to do so. The company remained at the forefront of design through the evolution of digital gambling machines, and the increasing popularity of online gambling and Australian pokies online over the past two decades has allowed it to grow significantly in the field; in terms of market share, it is the largest gaming equipment provider in the industry. Bally also expanded beyond creating games only, to specialising in providing gaming operators with a range of software applications and tools relevant to their operations, in areas like security, player tracking and data management and analysis.

A year before the deal with Scientific Games, Bally Technologies had acquired SHFL Entertainment, a table gaming provider, for US$1.3-billion. SGMS was started in 1973 as a diversified technology supplier to the lotteries and gambling sector. Its areas of operation included lottery games, systems and retail technology, electronic casino games, social and mobile gaming content, and sports betting technology, among others. In the 19 months preceding the New York-based SGMS takeover of Las Vegas-based Bally, SGMS had undergone significant expansion, including the US$1.5-billion acquisition of slot-machine manufacturer WMS Industries.

Merger Worth $5.1-billion

The Scientific Games deal with Bally Technologies saw Bally become a wholly owned subsidiary of SGMS, in exchange for US$5.1-billion in total. Approximately US$3.3-billion went to a direct purchase of shares, which SGMS acquired at US$83.30 per share; about 37% higher than the value of the stock at the start of the merger process. SGMS also assumed debt being carried by Bally to the tune of US$1.8-billion.

The new company will operate in three divisions: Gaming, Lotteries and Interactive. Projected revenues for the newest incarnation of SGMS are expected to be in the region of US$3-billion per year. The company now employs 8,300 employees and is expecting to save US$235-million in operating costs through combining the two operations.

Combining Expertise

The Scientific Games deal with Bally Technologies created a new, larger SGMS, with Gavin Isaacs as president and CEO, and Scott Schweinfurth as Vice President and CFO. The top management team all have experience at Scientific Games, WMS, Bally Technologies or SHFL. Derik Mooberry, formerly a Senior Vice President at Bally overseeing South America and Mexico, is Group Chief Executive of the Gaming operational division.

The Lotteries division Group Chief Executive is James Kennedy, who previously served as President: Printed Products and Chief Marketing Officer at SGMS. Jordan Levin, former Chief Operating Officer of a WMS subsidiary, serves as the president of the Interactive division.