• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Complimentary, accretive, and strategic acquisition for BYI.

BYI announces an agreement to acquire SHFL for $23.25/share in cash for total consideration of ~$1.3 billion (including debt of $8 million and cash of $41 million).  Once combined, BYI expects to achieve annual synergies of at least $30MM. The Company initiates fiscal 2014 guidance for Diluted EPS of $3.70 to $4.05, in-line with HE and consensus.

CONF CALL NOTES

  • Accretive to EPS and FCF in 1st 12 months after expected close of transaction in C2Q 2014
  • BYI will gain significant share in the e-table market and in international markets i.e. Asia and Australia.
  • Fully committed debt financing - new $1.3MM term B facility and $138.4MM transaction impact on excess capacity on RC facility 
  • Bally has 660 gaming systems; will be poised for growth in FY 2014 and beyond 
  • Propietary table games will be a new opportunity segment for BYI
  • Transaction will increase Bally's international revenue as a % of total revenues from 16% to 24%
  • Bally/SHFL combo (incl $30MM synergies): 
    • LTM REVENUE: $1.252BN 
    • LTM ADJUSTED EBITDA: $445MM
    • LTM FCF $204MM
  • SHFL had $124MM (LTM) in recurring revenues 
  • $30MM Synergies: economies of scale, supply chain, regulatory licensing, public company fees, marketing and tradeshows, facilities
  • Joint integration team will be formed
  • Comined debt/adjusted EBITDA expected to be 4.0x at closing
    • LTM DEBT/ADJUSTED EBITDA: 4.6x
  • FQ4 2013 earnings will be disclosed August 15, 2013
  • F1Q 2014 - will see some impact from the transaction in terms of costs

Q&A

  • Does not answer whether Gavin will be at the combined company post close
  • Any pushback from BYI customers given they're now selling across entire casino floor? Confident customers will be happy by the transaction.
  • Proxy will be out soon
  • Capital allocation strategy:  priority will be reducing debt levels
    • Target leverage level (pre-acquisition):  2-3x