Despite, or perhaps because of, weak profits at home, Australian gaming giant Aristocrat has moved to bolster its North American business by taking over US firm Video Gaming Technologies. The deal is worth US$1.28 billion and will see the Aussie firm take a stronger hold in the tribal casino gaming market in the USA.
Currently Aristocrat Leisure’s presence in North America is fairly small, with close to 8,200 gaming machines, but that figure is set to rise to around 28,400 following the takeover. The company’s revenue from the North American market will also rise, from 48 percent to 60 percent.
A Slice of the North American Pokies Market
The buyout of Video Gaming Technologies, based in Franklin, Tennessee, will be funded in part by an underwritten placement of $375 million, with further funds secured to repay the firm’s existing debts. This will include a new seven-year loan worth US$1.3 billion.
In a statement to the Australian stock exchange, Aristocrat chief executive Jamie Odell said: “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.”
Although one of the America’s largest gaming operators, Video Gaming Technologies is primarily focussed on ‘Class 2’ machines like bingo, as opposed to classic video pokies. Currently, VGT licenses over 20,000 bingo machines to Native American-run casinos in various states across the US.
A Year of Takeovers in Gaming
The move comes after the firm’s profits in Australia fell 19 percent. However, the company’s pokies continue to do well at home and abroad. Aristocrat pokies account for around half of all pokie machines in Australia.
Aristocrat’s share price after the buyout news emerged, ending on July 4 at $5.39, almost a year high.
In the company’s 2013 results, they reported a fall in profits, and a further drop in net profits by 8.2 percent was reported by the Sydney firm for the first half of 2014. However, the firm’s American business remains strong.
Aristocrat is one of the best-known names in the casino business. As well as having a firm presence in world casinos with its popular land-based pokies, Aristocrat-powered online casinos boast plenty of Internet games with huge progressive jackpots available to gamblers.
This latest acquisition comes at a time when other high-profile gaming companies are also in the middle of takeover bids, both as instigator and recipient. Last year, major Las Vegas player Bally Technologies bought out SHFL Entertainment in a $1.3 billion deal, while WMS Industries (Williams Interactive), responsible for some of the most popular pokies in the world, was taken over by New York firm, Scientific Games Corp.
The pokies market remains strong Down Under. A recent study by Roy Morgan Gambling Monitor found that Aussies spent some $16.3 billion in the last year on gambling, with 60 percent, or $9.8 billion, wagered on pokie machines. Until this year, when Singapore took the #1 spot, Australia led the world gambling league, a title it earned due mostly to Aussies’ love affair with pokies.