UPDATE 1-Aristocrat Leisure in talks to buy slot machine maker VGT

Wed Jun 25, 2014 1:08pm EDT

(Updates sourcing, share price)

By Mike Stone

June 25 (Reuters) - Aristocrat Leisure Ltd, an Australian gaming company, said on Wednesday it was in advanced talks to purchase U.S. competitor Video Gaming Technologies Inc.

A deal for Franklin, Tennessee-based Video Gaming Technologies (VGT), which makes slot machines primarily for Native-American casinos, could be valued at about $1 billion, said people familiar with the talks, who asked not to be named because the matter is private.

That price tag would be a big bite for Aristocrat, which had a market cap of over $2.82 billion at Tuesday's close, before its announcement.

Aristocrat issued a statement confirming the talks, citing media speculation in response to Reuters' requests for comment. Aristocrat dropped 2.5 percent in Australian trading on Wednesday.

While VGT has been for sale on and off for years, the two companies have been in talks in recent months, said the sources. The talks could fall apart at any moment, the sources cautioned.

A successful deal would be a significant step for Aristocrat as it continues to expand in the U.S. gaming market.

Makers of slot machines, known broadly as gaming equipment makers, are questioning their relevance as they face an aging population of users. Many are looking to Internet-based gaming as an option for growth in new, younger-demographic markets.

As companies look for more users on the internet and mobile devices, consolidation has begun, as evidenced by two mergers last year. Bally Technologies Inc purchased SHFL Entertainment Inc, and Scientific Games Corp purchased WMS Industries Inc.

Another gaming equipment maker, International Game Technology, is exploring a sale, as previously reported by Reuters. (Reporting by Mike Stone; Editing by Meredith Mazzilli and Jeffrey Benkoe)

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