Once ignored, Multimedia Games now may see other suitors

Four years ago, Multimedia Games was all but kaput.

CEO Anthony Sanfilippo fled for a similar role with casino operator Pinnacle Entertainment and the slot machine manufacturer was headed for the scrap heap.

Austin, Texas-based Multimedia put itself up for sale but couldn’t attract a buyer.

Six months later, the company changed direction. The “For Sale” sign was taken down, and Multimedia Games management decided to operate the business with renewed vigor.

Last week, Las Vegas-based Global Cash Access agreed to pay $1.2 billion for Multimedia Games.

If you held stock in Multimedia Games since March 2010, those shares have grown almost 10 times their original value.

The transaction wasn’t a surprise. The investment community’s opinion on Multimedia Games has done a 180-degree turn over the past 36 months. The company’s revenue and profit exceeded expectations every quarter.

Most analysts pegged Multimedia Games as an acquisition target.

Consolidation has been the hot topic in the gaming equipment sector since last year.

Scientific Games Corp., a New York-based lottery provider, which bought WMS Industries last year for $1.5 billion, is spending $5.1 billion to acquire Bally Technologies. Last year, Bally bought gambling equipment manufacturer SHFL entertainment for $1.3 billion.

Italian lottery giant GTECH Holdings is buying International Game Technology for $6.4 billion.

Multimedia Games’ buyer, however, was a surprise.

Global Cash Access provides cash, credit, and payment technology to casinos. It doesn’t make slot machines.

“The take-out was not expected,” Union Gaming Group analyst Robert Shore told investors. “Global Cash Access’ core business is not in gaming technology development and distribution.”

Multimedia Games, which has a sales and marketing office in Las Vegas, grew in value as the company changed focus.

In 2010, Multimedia Games had only a handful of gaming licenses and concentrated on game sales to lower-tier casino markets. The company’s board removed the interim title from CEO Patrick Ramsey. The manufacturer was licensed in major casino jurisdictions, including Nevada, New Jersey, Pennsylvania, Mississippi and Louisiana.

Increased sales improved the balance sheet. Rave reviews were given to TournEvent, Multimedia’s linked slot machine product that allows casinos to run multiple tournaments. The company is nearing 20,000 slot machines in the U.S. market.

Multimedia Games took casino floor space away from the big companies — IGT, Bally, WMS — while its share price increased. Earlier this year, Multimedia Games spent $13 million to acquire PokerTek, an electronic table game company.

The success is a key reason why analysts believe another offer for Multimedia Games could be on the horizon.

In recent gaming equipment deals, sizable cost savings were viewed as a key bonus. Global Cash officials said the transaction offered $30 million in annual cost savings.

Analysts called the figure tiny compared to recent manufacturing deals. The GTECH-IGT merger is expected to bring $280 million in savings over three years.

A breakup fee to cancel the Multimedia Games buyout is also relatively small, just $11 million. It expires Oct. 8 and the price jumps to $32.5 million.

Shore told investors it “made more sense” for an existing slot machine company to buy Multimedia Games.

“We would not consider beyond the realm of possibility the potential for another, more pure-play concern within the equipment space, to step in with a competitive bid,” Shore said.

Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski told Multimedia shareholders to “remain patient.”

He expects another buyer to surface, offering a higher figure than Global Cash Access’ $36.50 per share payment, 31 percent above Multimedia’s Sept. 5 closing price. The transaction is valued at 9.1 times the company’s annual cash flow.

“We could foresee a scenario in which another slot manufacturer looks at the (cash flow) offer currently on the table and, through the identification of more meaningful cost synergies, puts together a richer offer,” Wieczynski said.

Global Cash Access views things differently.

The combined companies would produce $800 million in annual revenue, based on the last 12 months of financial results.

Global Cash Access CEO Ram Chary said adding Multimedia Games allows the company to offer “deeper and more integrated solutions to casino floors.”

During a conference call with analysts Sept. 8, Chary said Global Cash Access is licensed in more jurisdictions than Multimedia Games, allowing the slot machine business to expand quicker into new markets.

Wieczynski disagreed.

“We believe a slot manufacturer would be able to harvest greater deal-related synergies and, in turn, offer a premium to Global Cash Access’ $36.50 takeout price,” he said.

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

ad-high_impact_4
Business
Bellagio, MGM Resorts International’s luxury hotel turns 20
The more than 3,000-room Bellagio hotel is situated on the site of the former Dunes Hotel. The Dunes was imploded in 1993, and construction of the Bellagio started in 1996. It cost $1.6 billion to build, making it the most expensive hotel in the world at the time. The Bellagio was former Wynn Resorts Ltd. Chairman and CEO Steve Wynn’s second major casino on the Strip after The Mirage. MGM Resorts International acquired the property from Steve Wynn in 2000. (Tara Mack/Las Vegas Review-Journal)
Facial recognition software at G2E – Todd Prince
Shing Tao, CEO of Las Vegas-based Remark Holdings, talks about his facial recognition product. (Todd Prince/Las Vegas Review-Journal)
Former NBA player, Shaquille O'Neal, speaks about his new Las Vegas chicken restaurant
Former NBA player, Shaquille O'Neal, speaks about his new Las Vegas chicken restaurant. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Bobby Baldwin to leave MGM
MGM Resorts International executive and professional poker player Bobby Baldwin is set to leave MGM.
Caesars has new armed emergency response teams
Caesars Entertainment Corp. has created armed emergency response teams. They are composed of former military and law enforcement officials. "These teams provide valuable additional security capabilities,” Caesars spokeswoman Jennifer Forkish said. Caesars is hiring Security Saturation Team supervisors, managers and officers, according to LinkedIn. The company did not say how many people it plans to hire for the units. (Las Vegas Review-Journal)
Las Vegas, airlines prepare for CES
CES in January is expected to attract more than 180,000 attendees. (Las Vegas Review-Journal)
AGS partners with Vegas Golden Knights
AGS is the nation’s second-largest manufacturer of Class II slot machines used primarily in tribal jurisdictions. It announced a marketing partnership with the Vegas Golden Knights NHL team. (Las Vegas Review-Journal)
Lehman Brothers bet big on Las Vegas
Lehman Brothers collapsed 10 years ago, helping send the country into the Great Recession.
Fremont9 opens downtown
Fremont9 apartment complex has opened in downtown Las Vegas. (Marcus Villagran/Las Vegas Review-Journal) @marcusvillagran
Ross & Snow launches in Las Vegas
Luxury shoe brand Ross & Snow has opened in Las Vegas, featuring "functional luxury" with premium shearling footwear. (Bailey Schulz/Las Vegas Review-Journal)
Remote Identification and Drones
DJI vice president of policy and public affairs discusses using remote identification on drones. (Bailey Schulz/Las Vegas Review-Journal)
Drones and public safety in Nevada
Two representatives in the drone industry discuss UAV's impact on public safety. (Bailey Schulz/Las Vegas Review-Journal)
Frontier Airlines to launch flights from Las Vegas to Mexico
Frontier, a Denver-based ultra-low-cost carrier, will become the first airline in more than a decade to offer international service to Canada and Mexico from Las Vegas when flights to Cancun and Los Cabos begin Dec. 15. (Rick Velotta/Las Vegas Review-Journal)
MGM Resorts International CEO Jim Murren addresses Oct. 1 lawsuits
MGM Resorts International Chairman and CEO Jim Murren addresses criticism his company has received for filing a lawsuit against the survivors of the Oct. 1 shooting. (K.M. Cannon/Las Vegas Review-Journal)
MGM Resorts International opens the doors on MGM Springfield
Massachusetts’ first hotel-casino opens in downtown Springfield. The $960 million MGM Springfield has 252 rooms and 125,000-square-feet of casino. (K.M. Cannon/Las Vegas Review-Journal)
MGM Resorts International prepares to open MGM Springfield
Las Vegas-based MGM Resorts International gave news media and invited guests a preview of the $960 million MGM Springfield casino in Massachusetts. The commonwealth's first resort casino will open Friday, Aug. 24. (K.M. Cannon/Las Vegas Review-Journal)
A Walk Through Circus Circus
It only takes a short walk through Circus Circus to realize it attracts a demographic like no other casino on the Strip: families with young children. (Todd Prince/Las Vegas Review-Journal)
Morphy Auctions, a vintage slot machines seller, wants gaming license
Vice president Don Grimmer talks about Morphy Auctions at the company's warehouse located at 4520 Arville Street in Las Vegas on Thursday, Aug. 16, 2018. (Rick Velotta/Las Vegas Review-Journal)
Nevada's venture capital money doesn't stay in state
Zach Miles, associate vice president for economic development for UNLV, said there’s venture money in Southern Nevada, “but trying to find the right groups to tap into for that money is different.” According to a 2017 report from the Kauffman Foundation, Las Vegas ranked number 34 out of 40 metropolitan areas for growth entrepreneurship, a metric of how much startups grow. With a lack of growing startups in Las Vegas, investment money is being sent outside of state borders. The southwest region of the U.S. received $386 million in funding in the second quarter, with about $25.2 million in Nevada. The San Francisco area alone received about $5.6 billion. (source: CB Insights)
Neon wraps can light up the night for advertising
Vinyl wrap company 5150 Wraps talks about neon wraps, a new technology that the company believes can boost advertising at night. (Marcus Villagran/Las Vegas Review-Journal) @brokejournalist
Nevada on the forefront of drone safety
Dr. Chris Walach, senior director of Nevada Institute for Autonomous Systems, talks to a reporter at NIAS's new Nevada Drone Center for Excellence of Public Safety, located inside the Switch Innevation Center in Las Vegas. K.M. Cannon Las Vegas Review-Journal @KMCannonPhoto
Motel 8 on south Strip will become site of hotel-casino
Israeli hoteliers Asher Gabay and Benny Zerah bought Motel 8 on the south Strip for $7.4 million, records show. They plan to bulldoze the property and build a hotel-casino. Motel 8 was built in the 1960s and used to be one of several roadside inns on what's now the south Strip. But it looks out of place today, dwarfed by the towering Mandalay Bay right across the street.
TOP NEWS
News Headlines
Add Event
Home Front Page Footer Listing
Circular
You May Like

You May Like