Shuffle Master buying Progressive Gaming unit

Casino equipment provider Shuffle Master agreed Thursday to purchase the table games division from rival manufacturer Progressive Gaming International.

The transaction, which could close by the end of August, would give Shuffle Master control of one of the gaming industry’s more popular table games, Caribbean Stud. Shuffle Master distributes several table games, including Three Card Poker and Let It Ride.

The deal also includes Progressive’s Texas Hold’em Bonus poker, which one analyst said is more popular than Shuffle Master’s Texas Hold’em table game.

No purchase price was announced.

Financially troubled Progressive Gaming announced in March it was looking to sell its table game business as a way of freeing up cash flow and to pay down debt. Analysts expected the company to fetch between $40 million and $50 million for the division.

The two Las Vegas-based companies said they are also working toward a technology license agreement, where Shuffle Master would integrate Progressive’s jackpot system with several of its table game titles.

“Strategically, the addition of games like Caribbean Stud and Texas Hold ‘Em Bonus are a perfect fit for Shuffle Master, giving the company a near monopoly on proprietary felt-based tables,” Deutsche Bank gaming analyst Bill Lerner said in a note to investors.

Both Shuffle Master and Progressive Gaming have run into financial difficulties over the past year.

Shares of Progressive have fallen almost 52 percent in the last 12 months due to poor earnings and an antitrust judgment in a federal lawsuit that could cost the company $39 million.

Shuffle Master recently completed a restatement of earnings and posted a net income increase in its most recent quarter. Shuffle Master, however, took a bit of a financial hit over its $108 million purchase of Australian slot machine maker Stargames more than a year ago.

“We think the deal is an indication that Shuffle Master is returning to its core competencies, which is selling shufflers and proprietary table games,” Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said. “Investors will probably overlook this acquisition as most are still recovering from the Stargames acquisition that so far has not worked out.”

Morgan Joseph gaming analyst Adam Steinberg was supportive of the deal, but said last year’s Stargames deal is still impacting the view investors have of the company.

“We see this agreement as an incremental positive, adding value to Shuffle Master,” Steinberg said. “Several issues remain significant overhangs on Shuffle Master. Investors should continue to sit on the sidelines until we see a better grasp on Stargames.”

For Progressive Gaming, the transaction allows the company to switch directions.

“Upon closing this transaction, Progressive will have successfully transitioned itself to a company with a sole focus on providing advanced systems for the gaming industry,” company President Russell McMeekin said in a statement.