GTECH Holdings Corporation to Acquire Spielo
07 November 2003 - 11:40PM
PR Newswire (US)
GTECH Holdings Corporation to Acquire Spielo Acquisition of Leading
Video Lottery Solutions Provider to Support Company's Growth
Strategy and Advances Position in the Video Lottery Industry WEST
GREENWICH, R.I., Nov. 7 /PRNewswire-FirstCall/ -- GTECH Holdings
Corporation today announced that it has entered into an agreement
to acquire all of the shares of privately-held Spielo Manufacturing
Inc., a leading provider of video lottery terminals (VLTs) and
related products and services to the global gaming industry. The
enterprise purchase price for Spielo is approximately US$150
million, payable in cash. In addition, in the 18 months following
the closing, Spielo shareholders are entitled to receive an
earn-out amount of up to US$35 million, based upon Spielo achieving
certain VLT installation objectives in New York, giving the
transaction a potential total enterprise value of up to US$185
million. The acquisition, which is contingent upon regulatory and
gaming license approvals, and certain other closing conditions, is
expected to be completed in the second quarter of GTECH's fiscal
year 2005. "As a world-class provider of video lottery solutions,
Spielo has built a reputation of providing its clients with
preference-driven products, outstanding customer service, and
industry leading innovations," said GTECH President and CEO W.
Bruce Turner. "By acquiring Spielo, GTECH is better able to deliver
a complete, integrated VLT solution to our customers and prospects,
with a single point of contact and accountability." Spielo CEO Jon
Manship commented, "Spielo's acquisition by GTECH will afford the
company the resources and access to new markets needed for it to
grow to the next level of competitiveness. Of significant
importance to me as the founder of the company, this deal will also
help to secure our future and that of our workforce here in
Canada." "We believe that the video lottery business is positioned
for high growth in the foreseeable future, driven by a number of
factors including the likelihood of a number of US jurisdictions
approving expanded gaming, the demand for such technology in
overseas markets, and the increasing role of content replacement,"
continued Mr. Turner. "With Spielo, we are well- positioned to
capture new business and grow market share by leveraging our
leadership position in the lottery industry, our government
relations experience, global presence, and our technological
skills. We also gain a new source of revenue in a high-growth area
of our core business. All of these factors will enable us to drive
incremental, profitable, top-line growth for GTECH, and drive
greater value for GTECH shareholders." Video lottery has been a key
component to GTECH's growth strategy in recent years. Since 2001,
the Company has been awarded contracts to provide video lottery
central systems and/or products and services to customers in Rhode
Island, Oregon, Sweden, the Canadian provinces of Alberta and
Saskatchewan, and, most recently, Trinidad & Tobago. Recent
trends show an increasing number of jurisdictions that are
considering video lottery are choosing the model adopted by Rhode
Island, a model referred to throughout the video lottery industry
as Participation Games. Under this type of contract, the
manufacturer receives a percentage of the net win of a VLT, which
is similar to the integrated services model for online lottery
contracts, where the vendor supplies the capital and receives a
percentage of dollars wagered on lottery tickets. This model plays
directly to the core competencies of GTECH. Today, GTECH enjoys
more than 35 percent of the North American video lottery central
system business. Spielo owns about 14 percent of the North American
VLT business and maintains approximately 60 percent market share in
Sweden. Recently, Spielo was one of four machine providers chosen
to participate in New York, receiving nearly 25 percent of the
total machines, or approximately 3,400 VLTs, to be installed at
eight racetracks throughout the State. New York product
installations are expected to begin this month. When combining
GTECH's existing VLT Participation contracts in Rhode Island and
Trinidad & Tobago with Spielo's existing VLT Participation
contracts in Rhode Island, Delaware, and New York, GTECH will have
over 7,100 Participation-based VLTs in operation by December 31,
2005. This will make GTECH one of the largest global providers of
Participation-based gaming machines. "Spielo has grown along with
the VLT business since its founding in 1990, and has built a very
solid and successful niche specializing in this area of the
business," said Mr. Turner. "Besides having a well-deserved
reputation for high-quality terminals and services, Spielo also
brings to GTECH a large and well-regarded library of games with
over 120 unique titles." The ability to leverage Spielo's strengths
in video lottery terminal design and game deployment will provide
GTECH with an end-to-end terminal solution, and it will also equip
the Company with a broader base of opportunities including terminal
replacements and ongoing game royalties. In addition, it will give
the Company the opportunity to continually provide content to
lotteries in product sale environments, as well as potential future
terminal deployments to the various jurisdictions considering VLTs.
Headquartered in Moncton, New Brunswick, Canada, Spielo currently
employs approximately 400 people. Spielo's revenues for its current
fiscal year ended October 31, 2003 are expected to be approximately
US$95 million, up from US$68 million in 2002. EBITDA for the year
just ended is expected to be approximately US$29 million. GTECH
intends to maintain Spielo's operations in Canada and its separate
brand identity. An integration plan has already begun in order to
assure customers of uninterrupted services and a seamless
transition. Based on a projected closing date of June 2004, GTECH
expects that Spielo will provide a revenue contribution of US$70
million to US$75 million starting in the second quarter of fiscal
year 2005. GTECH currently expects this transaction to be earnings
neutral for fiscal year 2005. For the first 12 months of operation
post-acquisition, GTECH expects the revenue contribution to be
US$95 million to US$100 million, with an earnings contribution of
US$0.01 to US$0.02 per share. GTECH expects earnings contributions
from Spielo to improve in future years as the Company executes
against its growth strategy and captures new growth opportunities.
Webcast and Conference Call Information GTECH will host a
conference call for analysts and investors today, November 7, 2003,
at 8:30 a.m. (Eastern Standard Time). The call may be accessed in
two ways. It will be broadcast live over the Internet. Go to
GTECH's website at http://www.gtech.com/, click on "Investors,"
then select "Live Broadcast." Or, if you do not have Internet
access, you may listen to this call by dialing 612-332-0932. If you
are unable to listen to this call live, it will be available on
GTECH's website under "Conference Calls" in the "Investors"
section. Replay of the call will also be available by dialing
320-365-3844, access code 705359, beginning at noon today, November
7, 2003, through midnight on November 10, 2003 (Eastern Standard
Time). Certain statements contained in this press release are
forward looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Such statements include, without limitation,
statements relating to the companies' merger and strategic plans,
expectations and objectives for future operations, as well as the
prospects and financial outlook for GTECH, each of which reflects
management assumptions regarding: (i) the ability of GTECH to
integrate successfully the operations of Spielo and to achieve
efficiencies from that integration, (ii) the approval of the merger
by Spielo shareholders and regulatory authorities and the ability
of the parties to complete the merger, (iii) the future prospects
for and stability of the lottery industry and other businesses in
which GTECH and Spielo are engaged or expects to be engaged, (iv)
the future operating and financial performance of GTECH and Spielo
(including, without limitation, expected future growth in revenues,
profit margins and earnings per share), and (v) the ability of
GTECH and Spielo to retain existing business and to obtain and
retain new business. Such forward looking statements reflect
management's assessment based on information currently available,
but are not guarantees and are subject to risks and uncertainties
that could cause actual results to differ materially from those
contemplated in the forward looking statements. These risks and
uncertainties include, but are not limited to, those set forth
above, in GTECH's and Spielo's subsequent press releases and on
reports by GTECH on Forms 10-K, 10-Q and 8-K, and other reports and
filings with the Securities and Exchange Commission, as well as
risks and uncertainties respecting: (i) the potential impact of
extensive and evolving government regulations upon the companies'
businesses; (ii) the ability of the companies to continue to retain
and extend its existing contracts and win new contracts; (iii) the
possibility of slower than expected growth or declines in sales of
online and VLT lottery goods and services by the companies or their
customers; (iv) exposure to foreign currency fluctuations; (v)
risks and uncertainties inherent in doing business in foreign
jurisdictions; (vi) the relatively large percentage of the
companies' revenues attributable to a relatively small number of
their customers; (vii) the fact that several of GTECH's larger
contracts are to be rebid in the near future; (viii) the
possibility of significant fluctuation of quarterly operating
results; (ix) the intensity of competition in the lottery industry;
(x) the possibility of substantial penalties under and/or
termination of the companies' contracts; (xi) the ability of the
companies to respond to technological change and to satisfy the
future technological demands of its customers; (xii) opposition to
expansion of lottery and gaming; (xiii) the companies' ability to
attract and retain key employees; and (xiv) the possibility of
adverse determinations in pending legal proceedings. GTECH, a
leading global information technology company with $1 billion in
revenues and 4,900 people in 43 countries, provides software,
networks, and professional services that power high-performance,
transaction processing solutions. The Company's core market is the
lottery industry, with a growing presence in financial services
transaction processing. For more information about the Company,
please visit GTECH's website at http://www.gtech.com/. Contact:
Robert K. Vincent Public Affairs GTECH Corporation 401-392-7452
DATASOURCE: GTECH Holdings Corporation CONTACT: Robert K. Vincent,
Public Affairs of GTECH Corporation, +1-401-392-7452 Web site:
http://www.gtech.com/
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