Analyst: Progressive a takeover target

A Wall Street analyst has suggested that Progressive Gaming International should be bought out by slot machine giant International Game Technology.

In a report to investors, Todd Eilers of Roth Capital Partners said shares of Las Vegas-based Progressive Gaming, which fell to a 52-week low of $1.98 on Dec. 18, make the company as easy take-out target. In addition, Eilers said, Progressive’s balance sheet has improved in the past few months after an infusion of $50 million in equity.

He said Progressive Gaming’s casino management systems business would compliment IGT’s system products and that its existing contracts would help IGT extend its geographic reach and its customer base. Progressive and IGT are partners with Shuffle Master in a table game management system.

“IGT has been interested in Progressive in the past,” Eilers said in a note to investors released Thursday. “A series of recent events have made the potential for a take-out much more probable.”

Shares of Progressive, traded on the Nasdaq National Market, rose 5 cents, or 2.07 percent, Friday to close at $2.46. The company has almost 62 million shares outstanding and a market capitalization of $149.4 million.

Both Progressive Gaming Chief Financial Officer Heather Rollo and IGT spokesman Ed Rogich declined to comment on the analyst’s report.

Eilers said the Progressive’s troublesome year in 2007 caused it to erase more than $200 million in market capitalization. The price per share fell almost 75 percent due to disappointing earnings, a deteriorating capital structure and legal issues, Eilers said.

In November, Progressive Gaming agreed to settle a decade-old federal antitrust lawsuit with a rival table games developer for $20 million plus legal fees of $4.7 million, rather than appeal a verdict in which the company could have been liable for more than $39 million.

The company also sold its table games division for $30 million to concentrate on its technology software and management systems. A public offering in November brought $47 million of capital into the company.

“Despite the tumultuous year, the company addressed the aforementioned risk areas and shares now appear cheap relative to its historical average,” Eilers said.

The analyst has placed a “buy” recommendation of Progressive Gaming shares with a target price of $3.50.

“We note our current price target represents the low end of a possible buyout scenario,” Eilers said.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or (702) 477-3871.

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