Novomatic Considers Bond as Market Dip Dampens IPO Prospect
September 08, 2011, 11:25 AM EDTBy Jonathan Tirone
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Sept. 8 (Bloomberg) -- Novomatic AG, the world’s second- largest maker of slot machines, may sell bonds instead of holding an initial public offering after Austria’s benchmark stock index lost a quarter of its value this year.
“A bond is an option,” Chief Executive Officer Franz Wohlfahrt, 52, said in an interview at the company’s Gumpoldskirchen, Austria headquarters. “There are arguments against an IPO.”
Novomatic’s founder, Johann Graf, may not be willing to lose his influence over the pinball-machine importer that he transformed into a maker of slot machines, network-gaming algorithms and casino operator with businesses in more than a dozen countries, Wohlfahrt said. The market plunge that has erased a quarter of the Austrian Traded Index’s value this year also makes a listing less appealing, according to the CEO.
Graf has become one of Austria’s richest men with a net worth of about 4 billion euros ($5.6 billion) according to Vienna’s Trend magazine. He began Novomatic in 1980 and owns a majority stake.
The company aims to raise funds because it sees a “huge number of growth opportunities” in the global gaming market, Wohlfahrt said, speaking Sept. 6.
Novomatic reported a 53 million-euro first-half profit as revenue rose 17 percent to 655 million euros. Net income more than doubled last year to 130 million euros and sales gained 12 percent to 1.18 billion euros.
Longing for Listings
The company is “evaluating all options to optimize its financial structure” with a final decision “hanging strongly on market conditions,” Novomatic said today in an e-mail.
“The market is longing for new listings and some kind of new momentum,” Chief Financial Officer Peter Stein said from the company’s seven-story office tower overlooking vineyards 20 kilometers (12 miles) south of Vienna. “The Austrian debt market is limited in size, so the bonds that we’ve issued on a corporate level have already been benchmark in size.”
Novomatic may try to tap international investors by seeking a debt-agency rating on any new security, said Stein, adding that the company expects to be rated as “investment grade.”
The gambling device maker, which exports 90 percent of the machines it builds in Austria, has sold three outstanding securities worth 500 million euros total since 2005. Novomatic has less debt leverage than the world’s biggest slot maker, Reno, Nevada-based International Game Technology.
Revitalize Vienna
The U.S. slot-machine maker had 2.2-times more debt than earnings before interest, depreciation and amortization at the end of December 2010. Novomatic’s outstanding bonds were almost equal to the company’s Ebitda last year.
Novomatic had been planning to sell shares as early as this month, Format magazine has reported, citing unidentified bankers. Wohlfahrt said in May that the company “isn’t ruling out” a share sale.
“A listing in Vienna certainly would invigorate the Vienna exchange,” said Wolfgang Matejka, who manages 250 million euros at Matejka & Partner Asset Management in Vienna. “Anyone investing in the gaming sector would be bound to consider Novomatic if it were listed.”
The Austrian company, which produces its machinery in a 56,000 square meter (602,780 square feet) factory, is pushing its machine sales and casino operations into developing markets as regulations tighten at home.
“We are seeing changes in tightening up regulations because of player protection,” Wohlfahrt said. “In Vienna, we are expecting regulation that is much tighter than the existing one.”
About 64,000 slot machine players in Austria were identified as “problem gamblers,” according to a May medical study commissioned by ARGE, an addiction prevention institute.
--With assistance from Zoe Schneeweiss in Vienna. Editors: Thomas Mulier, Kenneth Wong
To contact the reporter on this story: Jonathan Tirone in Vienna at jtirone@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
