October 20, 2014 / 9:44 PM / in 3 years

UPDATE 1-Amaya Gaming to explore sale of Cadillac Jack subsidiary

(Adds details, background, CEO comment)

By Euan Rocha

TORONTO, Oct 20 (Reuters) - Amaya Gaming Group Inc, which has pivoted to focus on the fast-growing online gambling market, said on Monday it is exploring a sale of its Cadillac Jack subsidiary that makes slot machines and electronic bingo games for casinos.

Earlier this summer, Montreal-based Amaya closed on the $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.

Amaya said its strategic review process will consider varied alternatives for the Cadillac Jack business with the main aim of expediting Cadillac Jack’s growth and maximizing value for Amaya shareholders.

“In light of recent consolidation within the gaming machine supplier industry, we believe that this is an appropriate time to review and evaluate potential strategic alternatives for Cadillac Jack,” said Amaya’s Chief Executive David Baazov in a statement.

The gaming sector has been rife with consolidation over the last two years as a new generation of gamers has increasingly begun to bet online, leaving slot machine makers questioning their future and joining forces to strengthen their position.

In August, U.S. slot machine maker Scientific Games agreed to buy larger rival Bally Technologies Inc in a $3.27 billion deal. That deal came just a month after Italian gaming group GTech SpA said it would buy slot machine maker International Game Technology for $4.7 billion to strengthen its U.S. presence.

Those deals came after Scientific Games bought slot machines maker WMS Industries for $1.5 billion in 2013. Bally itself had acquired Israeli online casino company Dragonplay Ltd in June and casino equipment maker SHFL Entertainment in 2013.

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, which also began recently to develop some online versions of its popular slot machine games for online casinos.

Cadillac Jack has a library of over 165 game titles. It has an installed base of over 13,000 gaming machines, most of which generate recurring revenues for the company as the slot machines were installed on a participation agreement basis with casinos.

Amaya, whose share price has more than doubled over the last six month after news of the PokerStars deal emerged, said it has engaged Macquarie Capital and Deutsche Bank as its co-financial advisors to assist with the strategic review.

Although the vast majority of Amaya’s revenues is now being generated by its online gambling business, it still draws some revenue from certain other business-to-business ventures besides Cadillac Jack, including via the sale of online casino gaming technology and gaming machines for the lottery market. (Reporting by Euan Rocha; Editing by Lisa Shumaker and James Dalgleish)

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