* Deal for $3.27 bln, including debt $5.1 bln
* Estimate $3 bln combined revenue
* Sees savings of $220 mln annually
* Bally shares up 30 pct
(adds details, background, updates shares)
By Shailaja Sharma and Ramkumar Iyer
Aug 1 U.S. Slot machine maker Scientific Games
Corp will buy larger rival Bally Technologies Inc
in a $3.27 billion deal, the latest in a consolidating
U.S. gaming industry.
The deal, which was put together in just over three weeks,
will strengthen Scientific Games' casino management systems and
table gaming products as well as help it expand in Australasia.
A new generation of gamers who prefer to make bets online
have left U.S. slot machine makers questioning their own
relevance. They also face increased competition as their core
lower-income gambler base keep a tight lid on spending.
Credit rating firm Moody's downgraded its outlook for the
U.S. gaming industry in June to "negative" from "stable".
"Following a trail of recent mergers, we believe the
combination of Scientific Games and Bally Technologies makes
sense strategically," BMO Capital Markets analyst Edward
Italian gaming group GTech SpA said last month it
would buy slot machine maker International Game Technology
for $4.7 billion to strengthen its U.S. presence.
Scientific Games bought slot machines maker WMS Industries
for $1.5 billion in January last year. Bally acquired Israeli
online casino company Dragonplay Ltd in June, and casino
equipment maker SHFL Entertainment in 2013.
Scientific Games's $83.30 per share cash offer was a 38
percent premium to Bally's Thursday closing of $60.17 on the New
York Stock Exchange. The deal was valued at $5.1 billion,
including debt of $1.8 billion.
Bally's shares jumped as much as 40 percent to a record
$84.66 in morning trading, but were later up 30 percent at $78.
Scientific Games's shares were up 3 percent at $8.78 after
rallying up close to 20 percent.
BMO's Williams said he did not expect a competing bid,
citing the high premium and the cost savings the deal would
Scientific Games, backed by billionaire investor Ronald
Perelman, said it expects to save $220 million and cut $25
million in capital expenditure annually by the end of the second
year of the deal's close. It also expects tax benefits.
Perelman's MacAndrews & Forbes Holdings Inc holds a nearly
40 percent stake in Scientific Games.
The deal will add to Scientific Games's earnings per share
and cash flow immediately on its closing - likely early next
year - said the company, which had a market capitalization of
$720 million as of Thursday.
Scientific Games estimated its revenue at $1.6 billion and
that of Bally at $1.4 billion for the year ended March 31.
The company said it would finance the deal with cash on hand
and debt financing from BofA Merrill Lynch, J.P. Morgan and
Deutsche Bank Securities, who advised it on the deal. Cravath,
Swaine & Moore LLP served as the legal adviser.
Macquarie Capital and Groton Partners served as financial
advisers to Bally. Its legal advisers are Skadden, Arps, Slate,
Meagher & Flom LLP.
(Additional reporting by Supantha Mukherjee and Siddarth Cavale
in Bangalore; Editing by Simon Jennings and Joyjeet Das)