Fitch Ratings says consolidation trends sweeping the slot supplier industry are “definitely overdue.”
“We believe that redundant costs, including R&D, have helped to make the industry a priming point for consolidation, and that M&A activity in the sector highlights demand for content from slot vendors, particularly in a slow-growing environment in the United States,” the rating agency said in a statement released Tuesday.
Last week, U.S.-based Scientific Games announced that it would acquire its supplier, Bali Technologies Inc., in a $5.1 billion deal. Initially a lottery equipment and care provider, Scientific Games acquired WMS Industries Inc., the nation’s four largest slot provider, in 2013. Also that year, Bali Technologies acquired casino equipment company, SHFL Entertainment Inc., for $1.3 billion.
The Scientific Games-Bally deal follows the announcement of GTech SpA’s acquisition of International Game Technology (IGT). The $6.4 billion deal, which was confirmed last month, allows GTech, an Italian company that is a commercial lottery operator and game technology provider, to enter the U.S. casino slot provider industry, where IGT is a top player.
“The merger of Scientific Games further solidifies the already oligopolized slot vendor industry, creating a competitor on par with IGT, which is currently the market share leader, and delivering tangible cost synergies,” Fitch said. “In addition to cost synergies, the combination of slot and lottery businesses will enable Scientific Games and GTech to leverage slot content from Bali and IGT, respectively, across the lottery business.”
The consolidation is also taking place in other sectors of the casino supplier industry. JCM Innovation Corp, a subsidiary of JCM American Corp, announced Monday that it has entered into an agreement to acquire U.S.-based FutureLogic. The acquisition adds a line of peripheral components, including bill verifiers, printers, and digital media.
In April, U.S.-based Global Cash Access Holdings Inc., which supplies cash access products and related services to the gaming industry, completed the U.S.-based acquisition of New Wave Inc. New Wave is a supplier of compliance, audit, and data efficiency software to the gaming industry.
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