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IGT Agrees to Buy Rival Anchor Gaming

Acquisitions: No. 1 slot machine maker will pay $1.37 billion in stock and assumed debt.

July 10, 2001|JEANNINE DeFOE | BLOOMBERG NEWS

International Game Technology, the largest maker of slot machines, agreed Monday to buy rival Anchor Gaming for $1.37 billion in stock and assumed debt, further reducing the ranks of independent gaming-machine makers.

Reno-based IGT said it will pay one share for each of Anchor Gaming's. IGT stock (ticker symbol: IGT) eased 8 cents to $59.12 on the New York Stock Exchange on Monday, valuing Anchor at the same share price.

Anchor stock (SLOT) jumped $3.05 to $56.96 on Nasdaq but had been as high as $66.75 in June.

Both stocks have rocketed since mid-2000, partly because of strong sales of slot machines to Native American casinos in California and elsewhere. But that demand is waning, analysts say. "We're past the peak in new machines being ordered out of California," said Joyce Minor, analyst at Lehman Bros.

She predicted that IGT's earnings growth will slow to 12% in 2002 from 44% this year.

IGT controls more than 70% of the market for slot machines but said it doesn't expect regulatory opposition to the Anchor deal.

IGT faces more competition from Australia-based Aristocrat Leisure Ltd., the world's No. 2 maker of slots, which recently bought Las Vegas-based Casino Data Systems.

In acquiring Anchor, IGT would get all the profit from several joint ventures between the two companies, including the best-selling "Wheel of Fortune" game.

Sales and earnings for IGT and the industry have risen with sales to new casinos and with the growing popularity of slots based on popular movies and TV shows. IGT had revenue of $345 million in the first quarter; Anchor had revenue of $123 million.

Besides developing slots, Las Vegas-based Anchor manages a casino near San Diego for the Pala Band of Mission Indians, and two casinos in Colorado. IGT may sell those businesses, UBS Warburg analyst Robin Farley said.

Shares of the few remaining independent gaming-technology firms mostly slumped Monday, as some investors bet the IGT-Anchor deal means IGT won't be shopping for other takeover candidates soon.

Alliance Gaming (ALLY) slid $3.86 to $34.42, Multimedia Games (MGAM) dropped $1.55 to $20.05, and Shuffle Master (SHFL) lost 82 cents to $18.08, all on Nasdaq.

But WMS Industries (WMS) rose 51 cents to $29.01 on the NYSE.

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