Scientific Games Corp (
recently announced that the Nevada Gaming Commission has
unanimously approved the takeover of
WMS Industries (
, thus removing a major hurdle. In May, WMS shareholders
approved the acquisition, which is expected to close by the end
Early this year, Scientific Games agreed to acquire WMS for
$26.00 per share (approximately for $1.5 billion). WMS Industries
provides video gaming machines to the casino industry. The
company's online interactive business also develops games for the
causal, social and mobile segments.
Recently, the company announced the organizational structure for
the combined entity. Post-merger, Scientific Games chairman and
chief executive officer (CEO) A. Lorne Weil will continue in his
current position. Management also announced that the company will
operate into two industry groups, namely Gaming and Lottery.
Gaming will primarily comprise the core WMS gaming business;
Scientific Games' server-based gaming business; Gaming-related
systems businesses of both Scientific Games and WMS; and Williams
Interactive. The Lottery business will comprise legacy Printed
Products and Lottery Systems.
Scientific Games' acquisition of WMS Industries will likely
diversify the former's product portfolio and expand its global
footprint. Moreover, the current deal will also diversify
Scientific Games' revenue stream from lottery-based products and
cross sell WMS Industries' interactive gaming products and
We believe that the company's diversified product offerings,
international development activities, recurring revenue business
model and strong growth from the Internet-based business will
drive the stock over the long term.
Further, the domestic lottery industry is undergoing a
transition, which involves increasing involvement of private
vendors in state lottery management, higher prize payouts and
introduction of tiered pricing for national jackpot games to add
impetus to the sagging U.S. lottery industry. We believe that
Scientific Games is well positioned to benefit from these
transitions, going forward.
However, we believe that these measures will take some time
before they start contributing to the overall results. Moreover,
increasing investments for product development are expected to
hurt profitability in the near term.
Moreover, the company's acquisition strategy is expected to
provide Scientific Games a significant competitive edge over
rivals like GTECH,
International Game Technology (
Bally Technologies (
and Lottomatica going forward.
The sluggish macroeconomic condition in important international
markets is however the primary headwind for Scientific Games
going forward. Increasing investments for product development is
also expected to hurt profitability in the near term.
Currently, Scientific Games has a Zacks Rank #3 (Hold).
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