AQR starts Bally Technologies position
AQR Capital initiated a position in Bally Technologies during the third quarter of 2014. The position accounts for 0.22% of the fund’s 3Q14 portfolio.
Overview of Bally Technologies
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 acquires Scientific Games
On November 21, Scientific Games Corporation (SGMS) announced completion of a merger with Bally Technologies as part of the rising consolidation in the gaming equipment industry. The aggregate transaction value was 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. Scientific Games expects that this larger portfolio will help 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 through its subsidiary SGMS Escrow Corp (SGE) priced $3.15 billion of new senior notes in conjunction with the acquisition of Bally Technologies.
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 (or earnings before interest, tax, depreciation, and amortization) 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.”
AQR Capital’s other 3Q14 positions
During 3Q14, AQR also increased its position in Gilead Sciences Inc. (GILD), Shire Plc (SHPG), Intel Corp (INTC), Glimcher Realty Trust (GRT), and Biogen Idec Inc. (BIIB). It sold positions in AstraZeneca (AZN) and Riverbed Technology Inc. (RVBD).
The next part of this series will explore AQR’s position change in Gilead Sciences Inc.