The combination of Scientific Games (NASDAQ:SGMS) and Bally Technologies (NYSE:BYI) will create a gaming and lottery juggernaut able to stir up $220M in annual cost synergies and $25M in annual capex spending savings, according to the companies.
The pairing will also see "accelerated utilization" of various tax attributes on U.S. income which will help the bottom line.
The lush premium paid for Bally could give a lift sector peers Multimedia Games (NASDAQ:MGAM) and International Game Technology (NYSE:IGT) today.
In other news, Las Vegas Strip win revenue of $592.9M in May rose 17.3% Y/Y according to the Nevada Gaming Control Board. The state's nonrestricted gaming licensees reported total gaming win of $970M in May, up 8.1% from a year ago.
Revenue from online gaming continues to disappoint in New Jersey. The Internet win for April for major players Borgata (BYD, MGM), Caesars Interactive (CZR), Trump, and Golden Nugget came in at $11.4M - less than $11.8M brought in during March. Original forecasts called for a take of over $30M a month in 2014.
Easy access to illegal online gambling operators is thought to be reducing customer traffic. As a result, gaming companies are having a tough time capturing their investments as quickly as anticipated and are turning conservative.
Boyd Gaming says it will cut advertising after recording a $3.2M loss from its Internet gaming business in Q1, while 888 Holdings (EIHDF) is shifting ad dollars to slots.
The total gaming win in New Jersey (online and brick-and-mortar casinos) through April is down 1.2% to $874M. (Full report .pdf)
The impact on brick-and-mortar casino traffic from legalized online gaming has been negligible so far in Nevada as well.
The American Gaming Association has dropped support for legalizing online gambling after seeing some major divisions between members on how a roll-out should progress.
Casino heavyweights have bickered over what the regulatory framework should be for the industry.
Though the launch of online gambling in Nevada, New Jersey, and Delaware hasn't gone as well as expected with offshore operators still dominating, Morgan Stanley forecasted the legal online gambling market could reach $8B a year by 2020.
IGT (IGT -10.4%) posted FQ2 EPS that was slightly above the guidance provided in a March 25 warning, and reiterated a forecast for FY14 (ends Sep. '14) EPS of $1-$1.10. But the company also reported gaming product sales (40% of revenue) fell 27% Y/Y to $202.6M, after having grown 4% in FQ1. Machine units recognized fell 45% to 7.9K, a reversal from FQ1's 20% growth.
Gaming operations revenue fell 9% Y/Y to $230.4M (-8% in FQ1), with IGT's installed base falling 6% to 53.4K and yield declining 5% to $47; weaker MegaJackpots revenue is blamed.
Interactive revenue rose 20% Y/Y to $79.8M (thanks to a 27% increase in social gaming revenue), but that's a slowdown from FQ1's 41%. DoubleDown's MAUs fell 1% to 6.2M after growing 26% in FQ1, but its bookings per DAU rose 16% to $0.43.
Peers are also lower: BYI -3.9%. MGAM -2.1%. SGMS -4.1%.
International Game Technology (IGT -14.7%) tumbled to within striking distance of its 52-week low ($14.75) after missing FQ1 estimates and stating it its FY14 (ends Sep. '14) EPS is now "more likely" to be at the low of its prior guidance range of $1.28-$1.38, with "potential further downside risk." The consensus is already at $1.28.
IGT's gaming ops (41% of revenue) remain under pressure: sales fell 8% Y/Y in FQ1 (lower North American MegaJackpots revenue is blamed) after dropping 6% in FQ4. The division's gross margin fell 200 bps to 61%, and its installed base 4% to 54.3K.
Product sales (45% of revenue) managed to grow 4% after being flat in FQ4. Gross margin fell 100 bps to 52%. Interactive sales remain an area of strength, growing 41% on the back of 57% social gaming growth. Gross margin rose 500 bps to 63%, and monthly active users for IGT's DoubleDown social casino gaming unit rose 26% to 6.2M.
IGT says it's "in the process of implementing a number of measures, including cost reductions," in response to its recent challenges.
Peers Bally Technologies (BYI -5.9%), Multimedia Games (MGAM -3.8%), and Scientific Games (SGMS -8%) also fell sharply on a bad day for equities.