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
