Deal set, but price debated

Gaming equipment provider Shuffle Master completed its thrice-delayed acquisition of Progressive Gaming International’s table games division Wednesday.

But the two Las Vegas-based companies differ on the value of the deal.

Shuffle Master said the entire price of the transaction will be $30 million. Progressive Gaming said in a separate statement that an analysis of the deal was that it would receive between $37.4 million and $46.5 million.

When Progressive Gaming announced in March it was asking Roth Capital Partners to assist in the sale of its table games division, which incudes such titles as Caribbean Stud and Texas Hold’em Bonus Poker, gaming analysts had estimated a deal would be worth between $40 million and $50 million.

Shuffle Master and Progressive also couldn’t agree on the initial upfront payments that would be made at closing, which is expected by the end of the week or early next week. Shuffle Master said it would pay Progressive Gaming $22.8 million — $19.8 million initially and $3 million as a recoupable advance for a systems integration. Progressive said the total payment was $23.4 million.

The agreement also calls for Shuffle Master to pay Progressive Gaming royalty fees from 2008 to 2016 based on the revenue growth from the newly acquired table games. Shuffle Master said it would guarantee at least $3.5 million of the payments.

Deutsche Bank gaming analyst Bill Lerner said it appears the companies are using different figures on what they each expect the royalty payments will total during the eight-year period.

Shuffle Master, which has a long roster of table games it offers to casinos, such as Three Card Poker and Let It Ride, was tabbed by analysts early on as the logical buyer of Progressive Gaming table game titles. Progressive has been transforming itself over the past year into gaming systems and technology provider to casinos.

“This was a natural deal for us,” Shuffle Master Chairman and CEO Mark Yoseloff said. “The only matter was what the deal would be worth.”

Yoseloff said Progressive had done a good job getting its table games in the growing Asian gaming market. In Macau, the company has between 175 and 200 Caribbean Stud tables in casinos on the Macau Peninsula and at the recently opened Venetian Macau on the Cotai Strip.

“Once this transactions closes, we will have roughly 80 percent of all the proprietary table games in the market worldwide,” Yoseloff said.

Shuffle Master and Progressive Gaming had struck an agreement for an undisclosed price in July, but the deal was delayed three times over the past month. Nevertheless, Lerner thought the purchase was a good move for Shuffle Master, which can now use Caribbean Stud and other Progressive titles on its multi-player electronic table game platform.

“This deal is immediately accretive to earnings for Shuffle Master and the company picks up some important intellectual property,” Lerner said.

The companies also struck a five-year agreement in which Shuffle Master will use Progressive table game bonus jackpot technology.

Yoseloff said growing the company’s table game offerings will enhance cash flow.

“Our specialty table game portfolio includes the majority of the industry’s top performing titles,” Yoseloff said. “The technology will enable us to offer exciting progressive jackpots on many of our popular games.”

The deal was announced after the close of trading on the Nasdaq National Market, which lists both companies. Shares of Shuffle Master closed Wednesday at $15.25, up 69 cents, or 4.74 percent. Progressive Gaming closed at $4.87, up 8 cents, or 1.67 percent.

Progressive Gaming CEO Russel McMeekin said the company would use the initial proceeds from the sale, along with $31 million in financing obtained last month, to repay debt.

“The effect of this debt reduction will be a significant decline in our interest expense, which will be immediately accretive to our cash flows and earnings,” McMeekin said.