Scientific Games says Bally merger to save $220m in costs, eyes Asia growth

Scientific Games Corporation says its proposed merger with Bally Technologies will deliver more revenue and profits, much of it through early and easily achieved synergy gains, according to a filing with the U.S. Securities and Exchange Commission.SG and Bally are currently placed second and third respectively in tables of global gaming and lottery revenue. A merger would create a company second only to the combined GTECH and IGT in revenue and EBITDA (GTECH revenue for FY14 is given as $6.274 billion vs $3.007 billion for SG/Bally; EBITDA of $2.319 billion vs $1.335 billion respectively.)The merged company would have interests in instant tickets, slots, lotteries, WAP, gaming systems, utility products, electronic table systems, proprietary table games, real money online gaming, and social gaming, which it says would make it the “most diversified gaming and lottery company in the world.”The filing and presentation to lenders made on 3 September refers to $220m of synergy savings, 80 percent of this being achieved in the first year. Staff would be reduced by 21 percent in the first year of the merger. Further savings would be made in R&D and in capital expenditure. The $220m figure is said to be 11 percent of total costs in the combined business.Once only merger costs are estimated at $76m for synergies and $40m for capex.Revenue and gross margins are expected to grow in FY14 for table products, interactive games, instant products, but to decline in systems, and lottery systems.In electronic table games, the filing refers to “strong sales” in Australia and Asia, and an “increase in low denomination table offering in Macau, which is subject to a table cap.” In proprietary games, there is “a significant Macau expansion opportunity.”SG is also emphasising the quality of management in the merged company Richard Haddrill, Bally’s CEO and Neil Davidson, Bally’s CFO will join the combined board, which has “a proven track record of integrating acquisitions”, citing SG’s acquisition of WMS and Bally’s acquisition of SHFL, both achieving cost savings ahead of expectations.Lender commitments are set for 15 September with regulatory approval expected by the end of the year.