July 7, 2014 / 1:30 AM / 4 years ago

UPDATE 1-Australia's Aristocrat Leisure to buy US slot machine maker VGT for $1.28bn

(Adds deal and industry details, Aristocrat’s market value)

SYDNEY, July 7 (Reuters) - Australian gaming machine maker Aristocrat Leisure Ltd has agreed to buy privately owned U.S. peer Video Gaming Technologies (VGT) for $1.28 billion in a deal that will help Aristocrat grow in the United States.

The all-cash deal is likely to catapult Aristocrat to the leading position in Native American casino gaming with a market share of 31 percent, up from 5 percent now, the company said in an investor presentation on Monday. Native American casinos house about 40 percent of all gaming machines in the United States.

The deal comes as the gaming industry pursues consolidation to combat slow growth. Another equipment maker, Las Vegas-based International Game Technology, is exploring a sale , and Aristocrat said revenue from VGT’s operations may give it sufficient firepower to consider expansion in other parts of the world.

VGT, based in Franklin, Tennessee, makes slot machines primarily for Native American casinos. VGT reported revenue of $236 million for the year-ended December 2013.

Aristocrat said it will fund the acquisition and also refinance existing debt through two new debt facilities worth $1.3 billion and A$100 million ($93.44 million) respectively, as well as an underwritten institutional share placement of A$375 million. Aristocrat shares were placed on a trading halt on Monday pending the share placement’s bookbuilding.

At $1.28 billion, VGT’s price tag is close to half Aristocrat’s market value of A$2.98 billion ($2.79 billion) at Friday’s close. The Australian firm posted a net profit of A$107.2 million for the full year ended September, up nearly 17 percent from a year ago. ($1 = 1.0702 Australian Dollars) (Reporting by Swati Pandey; Editing by Eric Meijer and Kenneth Maxwell)

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