Regulators grant tentative OK to Scientific Games' purchase of WMS Industries

Lottery systems provider Scientific Games received tentative approval Wednesday from the Gaming Control Board to purchase slot machine manufacturer WMS Industries for $1.5 billion.

The Nevada Gaming Commission will have a final say on the matter on Sept. 26.

Scientific Games is headquartered in New York. It’s largest shareholder is financier Ronald Perelman, who is ranked 26th on the Forbes 400 list of billionaires with a net worth of $12.2 billion. Perelman owns 38 percent of Scientific Games.

Perelman, 70, attended the Gaming Control Board meeting but did not take part in the formal presentation.

Gaming Control Board Chairman A.G. Burnett asked Perelman about his interest in the merger.

“It’s a fabulous deal,” Perelman said. “It will allow us to become a stronger player in the marketplace.”

Perelman, who also owns a large stake in cosmetics giant Revlon, said his investment fund had looked at acquiring “a destination resort” a few years ago, but decided it was more a real estate investment. He explored other ways to enter the casino industry.

“We like gaming and it’s a great industry,” Perelman said.

In addition to his business holdings, Perelman is known for his somewhat colorful personal life. He’s been married five times.

He drew laughs in the hearing room when he told Burnett, “I expected you to ask me about my divorces. I’m glad you didn’t. I’m a specialist (on prenuptial agreements).”

Scientific Games CEO Lorne Weil told the control board the company, post merger, will separately operate two divisions, gaming and lottery.

Weil said the combined companies would have $600 million in pretax earnings on a pro forma basis in 2013.

Weil said Scientific Games’ systems business would be integrated into WMS’s slot machine operations. At the same time, WMS’ slot machine content and game themes would be utilized in Scientific Games’ lottery business.

“Our systems business is a real systems business, unlike some of the systems offered by WMS’ competitors,” Scientific Games CFO Jeffrey Lipkin said.

Scientific Games officials said the merger would result in $100 million in cost savings.

Weil said the company intends to maintain WMS’s 145-person sales and service headquarters in Las Vegas.

“We have every intention to maintain a presence in Nevada,” Weil said. “We’re hoping (to) significantly add to that presence.”

As part of the merger, Weil said Scientific Games would retain current WMS executive Orrin Edidin as vice president and chief gaming development officer.

Burnett said at the conclusion of the nearly two-hour hearing that Scientific Games would be a “welcome addition” to the Nevada gaming landscape.

“It’s a smart deal, in my mind,” Burnett said.

Much of discussion during the hearing concerned Scientific Games’ regulatory activities and compliance structure.

Weil said the transaction has been approved by WMS shareholders and the Federal Trade Commission. There are still 11 state regulatory approvals needed before the deal, which was announced on Jan. 30, can close.

Lipkin said three investment banks have agreed to fund the transaction, in which Scientific Games will pay $26 per share for WMS. The merger will leave Scientific Games with $3 billion in debt, as well as a $300 million line of credit for future expansion.

Scientific Games is primarily a lottery service provider to several U.S. states and various countries around the world. Lipkin told the control board overall lottery sales worldwide were $275 billion annually, with $65 billion coming from the United States.

Just about every state that wants a lottery already has one, Weil told the control board. Nevada is one of just five states without a state lottery. Weil said Scientific Games “participates in some way” in every state lottery, either through direct management or as an equipment provider.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.