Aristocrat Leisure has secured a large slice of the Native American tribal gaming market with its $US1.28 billion ($A1.38 billion) takeover of a US competitor.
Aristocrat's chief executive Jamie Odell said he had convinced privately owned Video Gaming Technologies (VGT) founder Jon Yarbrough to sell the business he founded 23 years ago.
VGT is the largest provider of leased gaming machines to the tribal casino market with the bulk of its operations in Oklahoma.
Hundreds of tribal gaming operations operate on reservations in the US, representing more than 40 per cent of the country's gaming machines.
By snapping up VGT, Aristocrat will more than triple its gaming units from 8,200 to 28,400.
VGT is a large manufacturer of class two bingo-style games that have more favourable tax treatments than the class three random number generators Aristocrat makes more of.
"This is a transformational transaction that delivers compelling strategic and financial benefits, particularly significantly increased scale in North America," Mr Odell said.
"Growing our share of this profit pool is a major strategic priority for Aristocrat."
Based on last year's results, VGT would have added $167 million in pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) to Aristocrat's $188 million.
However Aristocrat, with a current market capitalisation slightly below $3 billion, will increase its net debt from about $234 million to an estimated $1.35 billion.
Aristocrat has launched a $A375 million capital raising with institutions and refinanced $US1.3 billion in long term debt.
Citigroup had previously raised the prospect of an equity raising and concerns that such debt would push gearing too high.
OptionsXpress market analyst Ben Le Brun said synergies from the takeover would determine if the price was cost effective.
He said it was a shrewd acquisition that would position Aristocrat for more growth in the highly lucrative US market, where the majority of its revenue comes from, and elsewhere.
Mr Odell said dividends would be maintained, rather than increased, as gearing was reduced.
He also flagged solid net profit growth for 2014.
He has previously forecast "strong" growth, blaming regulatory issues in Japan and Macau for the softer prediction.
Share
