WMS soars on news of $1.42 billion buyout deal
NEW YORK (AP) — WMS Industries' stock soared to its highest point in more than a year on Thursday after the gaming equipment company inked a deal to sell itself Scientific Games Corp. for about $1.42 billion.
THE SPARK: Instant-win lottery ticket company Scientific Games said early Thursday that it is buying WMS so that it can broaden its product offerings. Scientific Games, which also makes video slot machines and other gaming systems, will pay $26 per WMS share. That's a 59 percent premium to the company's closing price of $16.37 on Wednesday.
The companies put the deal's total value at approximately $1.5 billion, including $85 million in debt.
THE ANALYSIS: David Bain of Sterne, Agee & Leach said in a client note that he doesn't view the combination of Scientific Games and WMS as an immediate competitive threat to Bally Technologies and International Game Technology. The analyst said he feels that there could be some growing pains after the acquisition closes, "given our view of vastly differing cultures between the two companies."
Bain said the deal between Scientific Games and WMS shows that Bally Technologies and International Game Technology's cash flows are both undervalued. He said the transaction may also increase speculation of more potential consolidation in the casino supplier sector.
Bain maintained a "Neutral" rating and $17 price target.
SHARE ACTION: Shares of WMS Industries Inc. jumped $8.44, or 51.6 percent, to $24.81 in afternoon trading. The stock reached $25.34 earlier in the session, a price last seen in November 2011.