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Summary

  • Bally Technologies will be acquired by Scientific Games for $3.27 billion, or $83.30 per share, a 38% premium over Bally's closing price on Thursday of $60.17.
  • Bally Technologies' strong presence in Australia, New Zealand and the Pacific Islands will help Scientific Games expand to new markets.
  • My original article didn't predict a buyout of the company but outlined the value in the company and its potential for long-term growth.

Bally Technologies (NYSE:BYI) will be acquired by Scientific Games (NASDAQ:SGMS), a maker of slot machines for casinos, for $3.27 billion, or $83.30 per share. This cash offer is a 38% premium over Bally's closing price on Thursday of $60.17. The deal is valued at $5.1 billion, including debt. Scientific Games is a much smaller company than Bally Technologies, with a previous market capitalization of just $720 million. The company will use cash on hand and debt financing committed by J.P. Morgan, Bank of America and Deutsche Bank Securities.

By acquiring Bally Technologies, Scientific Games will establish a strong foothold in new markets, such as New Zealand, Australia and the Pacific Islands. Scientific Games expects to save $220 million in costs and cut capital expenditures by $25 million annually by the end of the second year of the deal. Gavin Isaacs, Scientific Games' President and CEO said:

"With leading gaming, lottery, and interactive content, world-class systems capabilities and table games offerings, we believe that the combined company will be uniquely positioned as a strategic partner for gaming and lottery operators, offering a highly diversified suite of value-enhancing products and services across multiple worldwide distribution channels and platforms."

My original article, "Undervalued Bally Technology Set To Capitalize On Gambling Expansion", showed how unrelated weakness in the market led to the company being undervalued compared to historic norms and how the company was strategically positioned to capitalize on global gambling expansion. I didn't see a buy-out occurring so soon and especially by a smaller rival, but the acquisition does demonstrate how competitors and banks realized the value in Bally Technologies.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Update: Bally Technologies Bought By Rival Scientific Games