Global Cash Access rings up winner with small Texas manufacturer

A year ago, the gaming investment community didn’t pay much attention to Global Cash Access.

The Las Vegas-based company did a quiet and exceptional job providing casinos with ATMs, point-of-sale and debit card transaction devices, slot machine ticket redemption kiosks, and other payment processing equipment.

Then, Global Cash Access stole the best little slot machine manufacturer in Texas.

Stole is probably a misnomer.

Global Cash Access paid $1.2 billion for Multimedia Games, which had its corporate headquarters, manufacturing facilities and development offices in Austin, Texas. The company maintained a sales and marketing arm in Las Vegas.

Earlier this month, during the company’s fourth-quarter earnings conference call, Global Cash Access executives talked about owning Multimedia Games. The sale closed at the end of December, and company officials are bullish on the new subsidiary.

When the deal was announced in September, it was widely acknowledged that the merger of a payment processing business and a slot machine manufacturer was an unusual marriage.

“Every day, we see more and more evidence that our rationale for the acquisition is tremendous and that the combination has created a company that is distinctly differentiated from any other,” Global Cash CEO Ram Chary said.

Eilers Research founder Todd Eilers asked during the question-and-answer session whether there had been any surprises in the nearly four months owning the slot machine business.

“Most of what we thought when we entered into the combination and closed it has turned out to be true,” Global Cash Chief Financial Officer Randy Taylor said.

Analysts who follow the gaming equipment sector were in love with Multimedia Games.

Financial issues, diminished sales prospects and lack of any interested buyers nearly shut down the company in 2010. But Multimedia became a genuine turnaround story.

The company developed slot machines that took away casino floor space from the big equipment manufacturers. Multimedia Games was delivering solid returns and its stock price was 10 times what it was four years earlier when Global Cash Access came calling.

With mergermania starting to sweep the slot machine sector, it was speculated that one of the major companies — Bally Technologies or International Game Technology — would swoop in and gobble up Multimedia. However, Bally was bought by Scientific Games Corp. for $5.1 billion and IGT signed a merger deal with GTECH Holdings for $6.4 billion.

That allowed Global Cash Access to quickly put together a deal.

During an interview at last year’s Global Gaming Expo, Chary said the purchase probably took the rest of the gaming sector by surprise.

But it made sense to bring together the businesses.

“It has been invigorating to work with the unique Austin culture of Multimedia Games,” Chary said.

The transaction has already eliminated $10.9 million in corporate costs. Company leaders expect to hit $24 million in cost savings by the end of the year.

On the conference call, Chary said the initial push is to place Multimedia’s slot machines into additional gaming markets. Global Cash Access is licensed in more than 300 jurisdictions, three times that of Multimedia.

But it may take a few months. Licensing outside Nevada and the major gaming hubs takes time.

“One of the underlying foundations of the combinations was for us to open up new markets and new jurisdictions for the slot product,” Chary said. “We’ve already seen quite a bit of traction on that front.”

Managing Multimedia Games in the future is the next step.

On the surface, there is a lack of gaming experience in Global Cash Access’ executive offices.

Multimedia Games CEO Patrick Ramsey, who was credited with breathing new life into the company, departed in December after the merger closed.

Chary spend six years in various roles at Fidelity National Information Services before joining Global Cash Access. Taylor, who has been with Global Cash Access since 2011, spent the previous three years as chief financial officer for Citadel Broadcasting Corp.

Mike Rumbolz is the only Global Cash board member with hands-on casino or gaming industry experience. He served as CEO of slot machine manufacturer Anchor Gaming back in the 1990s, and was president of Casino Windsor in Canada. Rumbolz is also a former Nevada Gaming Control Board chairman.

The gaming investment community is giving the company’s leaders a chance to prove themselves.

Eilers, in a note to investors following the earnings release, said the company’s core payment processing business remained solid in the fourth quarter, with revenue increasing 3 percent.

“We note Global Cash Access continues to renew and re-sign key customers,” Eilers said of contracts for payment processing products with Florida’s Seminole Tribe, Foxwoods in Connecticut, Station Casinos and Las Vegas Sands Corp. casinos in Las Vegas and Pennsylvania.

“Looking into calendar year 2015, management expects gross gaming revenue trends to remain healthy,” Eilers said.

That means more casino customers processing cash and credit card transactions.

But will Multimedia Games slot machines become more of the mix?

Chary said Global Cash Access is providing casino operators better deals than the competition for slot machines and payment processing products, which he believes is working in the company’s favor.

“We are offering them value and product that nobody else has and so I think that’s a good opportunity,” Chary said. “For the game side, we’re continuing to leverage the maiden Austin culture of Multimedia Games, which has really served to set our products apart in the industry.”

Howard Stutz’s Inside Gaming column appears Wednesdays and Sundays. He can be reached at hstutz@reviewjournal.com or 702-477-3871. Find on Twitter: @howardstutz.

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