AGI to Acquire Nova Technologies
Ainsworth Game Technology (ASX:AGI) has entered into an agreement to acquire US based gaming manufacturer Nova Technologies for US$38m.
Ainsworth Game Technology is willing to pay 8.1-8.5 times trailing EBITDA and will pay the total consideration in cash upon completion. The acquisition is funded through operating cashflow and a newly established multi-currency credit facility. The transaction is expected to be completed during the first quarter of calendar year 2016 and is subject to regulatory approval.
Nova Technologies LLC was founded in 2004 and focuses on Class III and Class II slot games in the American markets. The company has more than 1,300 gaming positions and earns daily fees.
Chief Executive Officer of AGI, Danny Gladstone, says the acquisition makes “great strategic and financial sense” for Ainsworth Game Technologies.
Furthermore Danny Gladstone commented on the acquisition: “We are very excited to announce the acquisition of Nova today, as it demonstrates our continued focus on growth in the key North American market. The transaction allow us to enter Class II gaming in an immediate and significant manner.”
The acquisition will provide Ainsworth with complementary geographic footprint with customers and operations in 11 states across the US and extends its existing reach. The transaction will also be earnings accretive in FY16 from day one after completion. The board believes that ts also provides significant growth opportunities in Americas and the existing customer base can leverage off the Nova acquisition.
Annual General Meeting and FY16 Outlook
Ainsworth game Technology also provided an outlook for FY16 during its Annual General Meeting (AGM). AGI expects continued revenue growth for the half and full year amid growth in international markets and market share gains in Australia. However AGI expects a temporary decline in margins due to increased investments and currency exchange movements. Bottom line, pre-tax profit is expected to be similar to FY16 with a stronger contribution during the second half of FY16.
Overall management is “confident” to deliver further revenue growth and margin improvements for beyond this year.
AGI shares fell more than 6% in early trade to be last quoted below the $3 mark.
Author: Simon Herrmann
Nov 17, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.