GAMCO starts Bally Technologies position
In 3Q14, Mario Gabelli’s GAMCO Investors began a new position in Bally Technologies Inc. (BYI). The position accounted for 0.11% of the fund’s third-quarter portfolio.
Bally Technologies overview
The diversified global gaming company Bally Technologies designs, manufactures, operates, and distributes the following products:
- gaming machines
- table game accessories
- casino management systems
- interactive applications
- networked and server-based systems for gaming operators
- spinning reels
- specialty gaming devices
- wide-area progressive systems
Under its business-to-business model, Bally supports a range of customers. These include traditional land-based, riverboat, and Native American casinos; video lottery firms; and central determination markets.
Bally Technologies to be acquired by Scientific Games
In August, Scientific Games Corporation (SGMS) agreed to acquire Bally Technologies as part of the rising consolidation in the slot machine industry. The aggregate transaction value is approximately $5.1 billion. This includes the refinancing of about $1.8 billion of existing Bally net debt.
A release on the acquisition noted that the transaction will expand Scientific Games’ portfolio of products and solutions to include casino management and table products such as automatic shufflers, proprietary games, and electronic systems.
The acquisition will also extend the range of Scientific Games’ social and real-money iGaming and iLottery products and services. This larger portfolio is expected to help Scientific Games cross-utilize content and technology throughout the lottery, gaming, and interactive sectors to propel future growth.
The release added that the companies “expect to realize $220 million in annual cost synergies and $25 million of annual capital expenditure savings by the end of the second year following the closing of the transaction.”
Scientific Games recently said it is looking to raise $2.9 billion via a bond offering to finance the Bally Technologies acquisition, but denied reports that the deal is facing funding issues. An unconfirmed Bloomberg from last month entitled “Scientific Games Banks Said to Put Off Bridge Loan Sale,” by Laura J. Keller and Jodi Xu, said that JPMorgan, Bank of America, and Deutsche Bank—all of which are financial advisors to Scientific on the deal—failed to attract interest for a $3.19-billion bridge loan for the transaction. The newswire said marketing for the bridge loan was put off by the banks as yields on junk debt reached the maximum levels amid concerns over a global economic slowdown.
Bally posts strong fiscal 1Q15 results
Bally’s latest fiscal 1Q15 revenue was up 29% to $321 million from $249 million last year, and adjusted EBITDA rose 34% to $116 million from $87 million. Adjusted EPS increased 22% to $1.17. The firm said it saw strong results “driven primarily by… electronic gaming machines and gaming operations revenue.”
GAMCO’s other activities in 3Q14
In the third quarter, GAMCO also added new positions in Weatherford International, TRW Automotive Holdings Corp., and Liberty Media Corporation Class C (LMCK). GAMCO acquired stakes in Sigma-Aldrich Corp. (SIAL) and Concur Technologies Inc. (CNQR), both of which are currently involved in merger and acquisition transactions. The fund added to its positions in Sony Corp. ADR, the Interpublic Group of Companies Inc., and Chemtura Corporation as well.
The next part of this series will highlight GAMCO’s position change in Sony Corp.