Global Cash Access Holdings and Multimedia Games Holding have entered into a merger agreement whereby GCA has agreed to acquire all the outstanding common stock of Multimedia Games for $36.50per share, for an aggregate purchase price of approximately $1.2bn in cash.
The transaction has been unanimously approved by the boards of directors of the two companies.
Multimedia Games is viewed as one of the up-and-coming slot machine manufacturers whilst Global Cash Access supplies gaming floors with ATMs, slot machines with ticket redemption and casinos with jackpot kiosks.
Ram Chary, President and Chief Executive Officer of GCA, said: “The acquisition of Multimedia Games represents a gaming-relevant transformational opportunity to combine two companies with rich gaming heritages and uniquely positions GCA as an important strategic partner to gaming operators by offering them deeper and more integrated solutions across their entire gaming floor. This acquisition further strengthens and broadens GCA’s portfolio of solutions, which has been embraced by our customer base.”
Patrick Ramsey, Chief Executive Officer of Multimedia Games, added: “We are excited about the opportunity this combination provides to leverage Multimedia Games’ creative and innovative game development capabilities with GCA’s expansive customer base to provide best-in-class, integrated solutions to the gaming community, and deliver increased value and scale to our respective customers and employees.”
Pursuant to the merger agreement, GCA will acquire all of the outstanding stock of Multimedia Games for $36.50 per share in cash, representing a 31 per cent premium to the closing stock price as of Friday, September 5, 2014, for an aggregate purchase price of approximately $1.2bn. The proposed acquisition will be financed with debt and cash on hand for which GCA has secured committed debt financing. The proposed acquisition is subject to customary closing conditions, including receipt of MGAM shareholder approval and antitrust and gaming regulatory approvals, and is currently expected to be completed in early 2015.
The merger is expected to achieve approximately $30m of synergies as a combined entity; and, on a pro forma basis, is estimated to generate about $800min revenues and approximately $217m in Adjusted EBITDA based on the last twelve months results as of June 30, 2014. The transaction is expected to be immediately accretive to GCA stockholders as of the closing date of the acquisition.
Ram Chary will continue to serve as President and Chief Executive Officer of GCA. The combined company’s headquarters will remain in Las Vegas, NV and its game development operations will be based in Austin, Texas.
Eilers Research founder Todd Eilers believes that a competing bid for Multimedia Games could be soon on the table. “We are not surprised to see Multimedia Games get acquired as we have been highlighting for quite some time that they were the most attractive target remaining in a consolidating industry,” Mr. Eilers said. “Other than basic general and administrative expenses and public cost synergies, we struggle to see any strategic benefits from the combination of the two companies.”
Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said: “While today’s announced acquisition follows in line with the broader industry consolidation theme, we cannot say we viewed Global Cash Access as a natural acquirer of Multimedia Games. Although the two companies serve the same customers, we see limited overlap in the products offered.”