Amaya to sell Cadillac Jack subsidiary to Apollo for $375 million
TORONTO (Reuters) - Amaya Gaming Group Inc (AYA.TO: Quote) said on Monday it has agreed to sell its Cadillac Jack subsidiary that makes slot machines and electronic bingo games for casinos to an affiliate of private equity firm Apollo Global Management (APO.N: Quote) for C$476 million ($375 million).
Montreal-based Amaya, which is pivoting to focus on the fast-growing online gambling market, said the deal is expected to close this year, subject to receipt of gaming regulatory and antitrust approvals. The proceeds from the planned sale will be used to lower debt.
"We view the transaction as positive. Although at the bottom of our expected range," said Canaccord analyst Robert Young in a note to clients.
Amaya had put the business on the block back in October, a short while after it had announced its $4.9 billion takeover of Rational Group, operator of online gambling website PokerStars, just as several U.S. states have begun to move on legislation to legalize online gambling.
At the time, Amaya said it was looking to maximize value for its shareholders, given a spate of consolidation in the gaming machine supplier industry.
In August, U.S. slot machine maker Scientific Games SGMS.O agreed to buy larger rival Bally Technologies in a $3.27 billion takeover. That deal came just a month after Italian gaming group GTech GTCH.MI agreed to buy slot machine maker International Game Technology (IGT.N: Quote) for $4.7 billion to strengthen its U.S. presence.
Amaya acquired Duluth, Georgia-based Cadillac Jack, which was focused on serving small to medium-sized casinos and bingo halls, for about $177 million in 2012. Amaya has since grown the business and also recently began to develop some online versions of its popular slot machine games for online casinos.
Last week, Amaya announced it plans to spin out and list its Diamond Game subsidiary into a new entity dubbed Innova Gaming. Diamond Game designs, develops, and markets games mainly for the North American lottery industry.
Young said, however, that the sale of Cadillac Jack is likely to be dilutive for Amaya, which is set to report results early on Tuesday. He estimates Cadillac Jack would have boosted Amaya revenue by C$115 million and its earnings before interest, taxes, depreciation and amortization by C$55 million in 2015. Continued...