Yo_Bubbas....................Here is the whole aticle on SLOT acquiring Powerhouse Technologies:
Anchor Gaming and Powerhouse Technologies, Inc. Announce Definitive Merger Agreement
PR Newswire - March 10, 1999 07:17
Anchor Gaming Plans to Change its Name to Anchor Technologies
LAS VEGAS, and ATLANTA, March 10 /PRNewswire/ -- Anchor Gaming ("Anchor") (Nasdaq: SLOT) and Powerhouse Technologies, Inc. ("Powerhouse") (Nasdaq: PWRH) announced today the signing of a definitive merger agreement. Anchor will acquire Powerhouse for $19.50 per share, which represents a 32% premium over yesterday's closing stock price, in an all cash merger. The merger creates a diversified international gaming entity with combined revenues of approximately $450 million. The transaction values Powerhouse at approximately $280 million, consisting of approximately $220 million of equity value and approximately $60 million of net debt estimated at closing. The transaction will be accounted for using the purchase method of accounting and is expected to be neutral to slightly accretive to Anchor within the first full year after closing.
Anchor's Chairman Stan Fulton stated, "This transaction represents an outstanding opportunity for Anchor to maximize long-term shareholder value by strategically transforming our company. With our strong balance sheet, we will be able to provide the capital necessary to fund the many growth opportunities inherent in Powerhouse's business segments." President and Chief Executive Officer Michael Rumbolz added, "The acquisition of Powerhouse provides Anchor with management depth and increased technological and manufacturing capabilities. The integration of these capabilities will enhance Anchor's technological leadership and growth opportunities in our proprietary games division." The merger expands Anchor's domestic route and casino presence through the addition of Powerhouse's Montana route operation and the Sunland Park Racetrack and Casino in New Mexico and also provides an entree for Anchor into the on-line lottery device and systems business.
"Powerhouse's strong recurring revenue base will enhance the stability of Anchor's earnings," Rumbolz added. "We feel there is significant growth opportunity in the on-line lottery business. Powerhouse currently has seven state lottery contracts representing 18% of the domestic on-line lottery market. There are more than ten other potential contracts subject to competitive procurements over the next two years and we expect to maintain or improve our market share. We are also pleased with the initial results of the casino at the Sunland Park Racetrack and look forward to applying our extensive expertise in operating slot machines to the facility."
Richard Haddrill, Powerhouse's President and Chief Executive Officer stated, "This transaction represents an excellent two and one-half year return to our shareholders. Furthermore, it provides our employees with significant opportunities going forward and ensures uninterrupted customer service. The combined company will have both the size and expertise to more effectively compete in today's consolidating gaming market."
In conjunction with the acquisition, Anchor announced it intends to seek shareholder approval to change its name from Anchor Gaming to Anchor Technologies. Anchor will also add two additional members to its Board of Directors: Richard Burt, current Powerhouse Chairman and former U.S. Ambassador to the Federal Republic of Germany, and Richard Haddrill.
The transaction is subject to approval by the shareholders of Powerhouse and the expiration of applicable waiting periods under the Hart-Scott Rodino Antitrust Improvement Act. The transaction, which will also require approval of various gaming authorities, is expected to close in the second half of calendar 1999. Merrill Lynch & Company acted as exclusive financial advisor to Anchor and rendered a fairness opinion to Anchor's Board of Directors. Lehman Brothers acted as exclusive financial advisor to Powerhouse and rendered a fairness opinion to Powerhouse's Board of Directors. The acquisition will be funded by a combination of cash on hand and a $300 million senior credit facility provided by a bank syndication group lead by Bank of America.
This press release contains certain forward-looking statements within the meaning of section 21e of the Securities Exchange act of 1934, as amended, and other applicable securities laws. All statements other than statements of historical fact are "forward-looking statements" for purposes of these provisions, including any projections of earnings, revenues or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing.
Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements. Although the company believes that the expectations reflected in any of its forward-looking statements will prove to be correct, actual results could differ materially from those projected or assumed in the Company's forward-looking statements. These risks and uncertainties include, but are not limited to: risks of proprietary games such as pressure from competitors, changes in economic conditions, obsolescence, declining popularity of existing games, failure of new game ideas or concepts to become popular, duplication by third parties and changes in interest rates as they relate to the wide area progressive machine operations within the Company's joint venture with IGT; competition in Black Hawk, Colorado; dependence on suppliers; changes in gaming regulations and taxes; dependence upon key personnel; and other factors described from time to time in the Company's reports filed with the Securities and Exchange Commission, including the company's form 10-K for the year ended June 30, 1998 and its forms 10-Q for the first two quarters of fiscal 1999. In addition, there are inherent risks in consummating the transaction described above and executing the strategy it entails. These risks include the difficulty of integrating two business organizations, the difficulty of achieving potential operational and business synergies, the necessity of obtaining regulatory approvals, and the risk associated with the debt financing of the transaction and future debt service requirements. Additional risks that should be considered for the combined entities are described in the reports of Powerhouse Technologies, Inc. filed with the Securities and Exchange Commission.
Anchor Gaming is a diversified gaming company that capitalizes on its experience as an operator and developer of gaming machines and casinos by developing gaming oriented businesses. Anchor Gaming currently develops and distributes unique proprietary games, operates two casinos in Colorado, and operates one of the largest gaming machine routes in Nevada.
Powerhouse Technologies, Inc., through its operating units -- VLC, AWI and United Tote -- is one of the leading suppliers of system software, equipment, and related services for on-line lotteries, video lotteries and pari-mutuel systems throughout the world, and a manufacturer and distributor of gaming devices for casinos. Presently, the Company's equipment and systems are in operation in the United States, Canada, Australia, Europe, South America and the Caribbean. Powerhouse also owns and operates Sunland Racetrack and Casino in New Mexico.
Anchor Gaming (SLOT) 35 9/16 (as of March 10, 1999)
815 Pilot Rd. Suite G * Las Vegas, NV * 702-896-7568 * 702-896-6992 (fax)
Anchor - SLOT Powerhouse - PWRH
FY Jun 1997A 1998A LTM FY Dec 1997A 1998A LTM
Revenues (mm) $153.7 $231.9 $250.4 Revenues (mm) $196.9 $201.2 $201.2
EBITDA (mm) $ 62.0 $118.9 $126.1 EBITDA (mm) $ 28.5 $ 29.3 $ 29.3
EPS $ 2.64 $ 5.20 $ 5.57 EPS $ 0.17 $ 0.42 $ 0.42
CashFlow/Sh $ 3.30 $ 6.14 $ 6.73 CashFlow/Sh $ 2.27 $ 2.23 $ 2.23
52 week range $33.00 - $94.75 52 week range $7.38 - $15.25
Shares Out. (mm) 12.4 Shares Out. (mm) 12.0
Market Value (mm) $428.5 Market Value (mm) $177.7
First Call growth % 14.0% First Call growth % 47.0%
Debt/Total Book Cap N/A Debt/Total Book Cap 63.9%
Price/Book Ratio 1.97x Price/Book Ratio 2.02x
The Transaction:
Anchor Gaming ("Anchor") has entered into a strategic merger with Powerhouse Technologies, Inc. ("Powerhouse") (Nasdaq-$14.81-PWRH). The all-cash transaction values Powerhouse at $220 million in equity or $19.50 per share, plus $60 million in net debt estimated at closing. Management expects the transaction to close in the second half of calendar 1999 and be neutral to slightly accretive to EPS within the first year of closing.
Pro Forma Description:
With the acquisition of Powerhouse, Anchor becomes a global, uniquely diversified gaming company. Proprietary Games will continue to be a main driver of growth both through stand-alone game introductions and the IGT alliance, which was recently extended through 2015. This division will benefit from Powerhouse's R&D and advanced technology. Anchor currently has more than 20 proprietary game concepts/titles in various stages of development. Automatic Wagering, Inc., (AWI), a subsidiary of Powerhouse, gives Anchor an immediate presence in the global, on-line lottery market. Backed by the combined company's strong balance sheet, AWI will have the opportunity to increase its global market share by leveraging its award- winning technology. By adding the Sunland Park Racetrack and Casino, Anchor will strengthen its position in the casino business and leverage off expertise acquired through its management of its two currently-owned casinos in Colorado. VLC, another Powerhouse subsidiary, dominates the video gaming machine and systems market. Anchor management will continue to pursue opportunities in additional jurisdictions both domestically and internationally. With the addition of United Tote, Anchor gains market share in the pari-mutuel on-line systems business. Lastly, Anchor will add to its route business a stable, 1,200-unit gaming machine route in Montana. Anchor will continue to maintain a significant presence in Nevada via its long-term relationship with Smiths Food and Drugs.
Growth Opportunities:
Proprietary Games
-- Currently, Anchor Gaming is working on more than 20 proprietary game concepts/titles either independently or within the IGT alliance (including Barcrest). That alliance, which was recently extended through 2015, recently recognized Anchor's intellectual property rights regarding bonusing and secondary events. The combined company will continue to place innovative games on the floors of casinos for a fee, and concentrate on the introduction of stand-alone games, progressives and conversion kits.
-- Anchor also has numerous distribution and manufacturing agreements with companies such as Silicon Gaming, Casino Data Systems and Alliance Gaming.
-- Powerhouse brings significant technological expertise, new products and years of R&D to Anchor's effort. Combined, the companies will continue to innovate, bring new products to the casino floor and be less reliant on outside technology.
On-Line Lottery (Automated Wagering, Inc.)
-- AWI represents Anchor Gaming's entry into the on-line lottery market. The company has 18% of North America's lottery contracts. Each lottery system is a high quality source of recurring revenue.
-- To date, AWI has been capital constrained; the balance sheet strength provided by Anchor will accelerate the pursuit of new contracts both domestically and internationally.
-- AWI's technology has received the highest rating in the last eight procurements.
-- More than ten potential domestic on-line lottery contracts are scheduled for procurement through 2000.
-- International lottery opportunities will be aggressively targeted in this expanding market.
Casino Division
-- The merger adds the Sunland Park Racetrack and Casino in New Mexico. The facility opened with 175 slots on February 22 and will increase to 300 units by April.
-- Management believes there is a possibility of revenue growth due to legislative change
-- Relationships with United Tote clients could be beneficial if enabling legislation brings gaming to additional domestic racetracks.
-- With a strong balance sheet, Anchor will continue to evaluate strategic acquisitions, both domestically and in international casino markets.
Video Gaming Machines (VLC)
-- Provides Anchor with the ability to design, develop and manufacture central system software/hardware and multi-game, touch screen video gaming machines.
-- Over 40% share in the video lottery market with 60,000 video gaming machines and 13 of 23 central system contracts worldwide.
-- Recent entry into the casino market with the introduction of coin free technology.
-- New market opportunities include South Africa, South America and Australia.
Route Operations
-- The Montana route adds proven and stable cash flows. Anchor's existing proprietary game designs and route experience may improve existing games while potentially decreasing costs.
-- Growth in the route division will likely continue on a single digit pace. However, Anchor will consider growing this segment through acquisition, if appropriate.
On-Line Parimutuel Systems (United Tote)
-- Provides parimutuel systems, terminals, and services worldwide with 37% market share in North America.
-- 85 contracts up for bid through 2001, which represents $40 million of potential revenues.
-- Relationships with existing racetracks could prove beneficial if positive legislation directs gaming to racetracks rather than riverboats or downtown locations.
This document contains certain forward-looking statements within the meaning of section 21e of the Securities Exchange act of 1934, as amended, and other applicable securities laws. All statements other than statements of historical fact are "forward-looking statements" for purposes of these provisions, including any projections of earnings, revenues or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements. Although the company believes that the expectations reflected in any of its forward- looking statements will prove to be correct, actual results could differ materially from those projected or assumed in the Company's forward-looking statements. These risks and uncertainties include, but are not limited to: risks of proprietary games such as pressure from competitors, changes in economic conditions, obsolescence, declining popularity of existing games, failure of new game ideas or concepts to become popular, duplication by third parties and changes in interest rates as they relate to the wide area progressive machine operations within the Company's joint venture with IGT; competition in Black Hawk, Colorado; dependence on suppliers; changes in gaming regulations and taxes; dependence upon key personnel; and other factors described from time to time in the Company's reports filed with the Securities and Exchange Commission, including the company's form 10-K for the year ended June 30, 1998 and its forms 10-Q for the first two quarters of fiscal 1999. In addition, there are inherent risks in consummating the transaction described above and executing the strategy it entails. These risks include the difficulty of integrating two business organizations, the difficulty of achieving potential operational and business synergies, the necessity of obtaining regulatory approvals, and the risk associated with the debt financing of the transaction and future debt service requirements. Additional risks that should be considered for the combined entities are described in the reports of Powerhouse Technologies, Inc. filed with the Securities and Exchange Commission.
Competitive Advantages:
-- Anchor can supply capital to expand Powerhouse business lines
-- Unlike many of its peers, the combined company will have the financial
flexibility to make further acquisitions
-- Alliance with International Game Technologies
-- Enforceable intellectual property rights in proprietary games division
-- Cumulative R&D spending is among the highest in the industry
-- Combines two proven design teams with significant software and hardware
capabilities
-- Truly diversified company with six distinct and varied businesses
-- Strong balance sheet with low cost of capital
Management:
-- Michael Rumbolz, President and Chief Executive Officer
-- T.J. Matthews, Executive Vice President
-- Joe Murphy, Vice President
-- Geoffrey Sage, Chief Financial Officer
Analyst Coverage/Market Makers:
-- BT Alex. Brown Robin Farley (212) 850-8715
-- Ladenburg Thalmann Andrew Zarnett (212) 409-2312
-- Merrill Lynch Naomi Talish (212) 449-7002
-- Prudential Securities Joe Coccimiglio (212) 778-8861
-- Raymond James Todd Jordan (212) 856-4360
-- Stifel Nicolaus Steve Schneider (800) 788-2190
SOURCE Anchor Gaming
/CONTACT: Michael D. Rumbolz, CEO and President, or Geoffrey A. Sage,
CFO, both of Anchor Gaming, 702-896-7568; or Susan J. Carstensen, CFO of
Powerhouse Technologies, Inc., 406-585-6746; or Wayne Brown of Carl Thompson
Associates, 800-959-9677/
(SLOT PWRH)
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