Howard Stutz – Scientific Games-Bally deal may lead to 21 percent cut in workers

Howard Stutz – Scientific Games-Bally deal may lead to 21 percent cut in workers
Howard Stutz – Scientific Games-Bally deal may lead to 21 percent cut in workers LAS VEGAS — The $5.1 billion buyout of slot machine giant Bally Technologies, Inc. by lottery provider Scientific Games Corporation could lead to a 21 percent reduction in the combined companies’ nonmanufacturing and production workforce.The number of jobs eliminated would provide a cost savings of $83 million — 57 percent of the anticipated $144 million in reductions expected in the merger’s first year.The information is part of a presentation officials from Scientific Games and Bally made to prospective lenders being sought to fund the transaction. The document was filed with the Securities and Exchange Commission in early September.New York-based Scientific Games is paying $83.30 per share to acquire all outstanding shares of Las Vegas-based Bally — valued at $3.3 billion. Scientific Games would also assume Bally’s $1.8 billion in debt.According to a subsequent SEC filing, Scientific Games raised $2 billion based on the presentation, roughly 40 percent of the money needed to complete the transaction. The company intends to seek an additional $3 billion in financing.Three banks overseeing the deal — Bank of America-Merrill Lynch, Deutsche Bank Securities and J.P. Morgan — committed to provide financing as a backup plan when the buyout was announced in July.Scientific Games officials declined to comment on the presentation, citing an SEC-mandated quiet period.The companies hope to complete the merger by year’s end.Scientific Games employs just under 5,000 workers. In 2013, the company more than doubled in size when it acquired slot machine maker WMS Industries Incorporated for $1.5 billion.Bally has nearly 4,000 employees. The company added several new divisions last year when it bought table game provider and gaming equipment manufacturer SHFL Entertainment for $1.3 billion.The cutbacks are expected to come from “redundant back office functions” according to the presentation, including accounting, finance, marketing, executive ranks, investor relations and sales. The job losses are not expected to affect manufacturing and production.Scientific Games was primarily in the lottery business. The Bally’s acquisition means ownership of two of the top three slot machine manufacturers — Bally and WMS — will be consolidated.According to the presentation, other cost savings are expected from eliminated “duplicative expenses,” such as professional fees, facilities and public company costs. Those cuts will account for 36 percent of the synergies, or $51 million in the first year. The combined companies’ purchasing power and lower operating costs are expected to cover the remaining 7 percent, or $10 million.Scientific Games expects to report $220 million in synergies through the merger with Bally in three years, with 87 percent of savings in the first year.Combined, the companies would have produced more than $3 billion in revenue and $1.3 billion in cash flow over the 12 months ended June 30.After the Scientific Games deal closes, Bally will operate as a subsidiary of the lottery company.The transaction is one of several consolidation deals in the slot machine industry.Italian lottery giant GTECH Holdings is buying IGT – International Game Technology for $6.4 billion in the gaming industry’s largest deal in almost 10 years. Payment processing provider Global Cash Access is buying slot machine maker Multimedia Games, Inc. for $1.2 billion.Also, Aristocrat Leisure Limited is buying Video Gaming Technologies, Inc., a Tennessee-based slot machine maker that provides equipment to the American Indian casino market, for $1.3 billion.Copyright GamingWire. All rights reserved.