Las Vegas Sun

March 29, 2024

IGT buying LV ‘bonusing’ company for $130 million

Slot and video poker machine manufacturer International Game Technology said today it has approved an agreement to acquire Acres Gaming Inc., a Las Vegas maker of slot machine bonusing systems that aim to build loyalty among slot players who patronize certain casinos.

IGT will pay $11.50 per share in cash for Acres, or roughly $130 million, under a board-approved deal expected to be completed in the fourth quarter.

The news sent IGT shares up 1.6 percent this morning, to $103.13. Acres Gaming stock rose nearly 1 percent, to $11.29.

The merger is subject to the approval of Acres' stockholders and various regulatory approvals.

Acres' bonusing systems will fill out IGT's suite of player tracking and accounting software, IGT Vice President of Marketing Ed Rogich said today.

"They seem to be a perfect match for what we have to offer," Rogich said.

IGT sells a system called "EZPay" that allows casinos to track play on "cashless" slot machines for tax accounting as well as marketing purposes. In recent years, major casinos have embraced cashless machines because they can dispense paper tickets instead of coins, reducing labor costs and increasing gambling volume.

Acres Gaming will continue to operate as an autonomous subsidiary of IGT, with no planned layoffs or changes to staff and management, Acres Chief Executive Bud Glisson said.

Glisson said the company decided to merge with IGT because the move "should be good news for investors, customers and employees alike."

"We will have the opportunity to leverage the strengths that IGT brings while retaining the strengths that have led to our success over the years," he said.

Acres Gaming, founded in 1991, has about 150 employees between its Las Vegas office at 7115 Amigo St. and another office in Corvallis, Ore. The company's cornerstone is bonusing software that can deliver cash or credits through a slot machine directly to players. Bonusing systems can reduce labor costs, ensure security of transfers and increase player visits to the casino and the amount they spend per visit, Acres says.

The company went public in 1993 at around $5 per share. Acres stock more than doubled in price last year but has swung up and down over the past decade, hovering as low as $1 per share in December 1999. Sales increases boosted company earnings to $7.3 million in the third fiscal quarter ended March 31, compared to a loss of $259,000 for the same period last year.

Acres also sells a variety of casino technology, including casino cage accounting systems, software that can map out a casino's most profitable machines, cashless slot systems, touch-screen features on slots featuring bonus games and systems providing slot club account information to players.

The company in April settled a lawsuit against IGT over technology used in a "Wheel of Gold" machine that an IGT-acquired company had patents for. Acres also agreed to license certain bonusing patents to IGT, which expected to pay a royalty advance of $10 million for use of the patents and for other licensing fees. The deal also called for Acres and IGT to co-develop new features for IGT slots and share revenue from the features.

Wall Street analysts reacted favorably to the merger, saying it will establish IGT as a market leader of bonusing products.

IGT has a history of acquiring smaller companies with technology or distribution channels that mesh with the company's operations, such as slot maker Anchor Gaming and casino game distributor Sodak Gaming, Merrill Lynch casino analyst David Anders said in a research note to investors today.

"We view this transaction positively as it will allow IGT to leverage (Acres') bonusing technology without incurring significant licensing fees," Anders wrote.

Lehman Brothers analyst Joyce Minor agreed.

"Given that 20 percent of Acres' revenues already comes from IGT, we view this deal as a logical small, bolt-on acquisition," Minor wrote in a research note.

The purchase price represents a fraction of the roughly $1 billion in cash on IGT's balance sheet, Anders said.

Analysts said the deal won't yield much upside potential for IGT stock, which blew past $100 per share Thursday.

IGT shares are trading at a level that is 10 times the company's estimated cash flow in 2004 of $845 million, 20 times the company's anticipated earnings per share of $4.80 and 17 times free cash flow of about $6 per share, J.P. Morgan analyst Harry Curtis wrote in a separate research note.

Station Casinos Inc., which has built its business on attracting repeat customers, has an exclusive relationship with Acres to develop Station's bonusing systems in the Las Vegas locals' market, analysts said.

Most recently, Acres helped develop the system behind Station Casinos' "Jumbo Jackpot" promotion, which allows slot club players to win a random jackpot each day at any of the operator's Station-branded casinos.

The combined company will compete with Alliance Gaming Corp. and Aristocrat Leisure Ltd., slot makers that also offer bonusing systems to casinos. Alliance's Bally Gaming and Systems unit makes a player tracking system known as SDS. Aristocrat, which operates its subsidiary Aristocrat Technologies Inc. from its North American headquarters in Las Vegas, offers similar products it acquired through Casino Data Systems Inc. of Las Vegas.

Join the Discussion:

Check this out for a full explanation of our conversion to the LiveFyre commenting system and instructions on how to sign up for an account.

Full comments policy