Aristocrat Leisure, a poker machine manufacturer, is spending $5b to enter’real-money gaming
Aristocrat Leisure is not known by most Australians, even though it is one of the 20 largest companies listed on Australia’s stock exchange. Its market capitalisation is close to $30 billion.
Colin Mansfield is a director at Fitch Ratings’ US corporate finance group. He is based in Boston but keeps an eye on Fitch Ratings’ North Shore headquarters.
Aristocrat is the largest manufacturer of electronic gaming machines (also known as EGMs or pokies) in the world. They are only for use in physical casinos, bars and pubs.
The company’s biggest bet is now: $5 billion to buy Playtech, a real-money gaming giant.
If it succeeds, the technology will be a dominant force in the electronic world of smartphones, tablets, and computers.
Playtech has big plans
Playtech is listed on London Stock Exchange. However, the Australian company wants it to be bought outright with an offer that values them at 58 percent more than what they were trading at prior to the announcement.
To seal the deal, shareholders in the UK must vote.
A bidding war could still be possible, as other parties have expressed an interest. However, Aristocrat has the box seat, with the support from the Playtech board.
Last month’s figures show that Aristocrat’s digital gaming revenue grew 15% to $2.6 Billion and accounted for more than half the company’s $820 million after-tax profit.
Potential US market of $100 billion
The real money gaming industry is expected to explode. According to Mr Mansfield, while the practice is legal in only six of America’s 50 States, he anticipates it expanding as more cash-strapped states seek out money.
He explains that the US is a $4 billion market. Future growth will depend on legalizing real-money gaming in more states.
Alexander Mees, Morgans’ senior analyst, wrote to clients that RMG could become a $US70Billion ($98 Billion) business in just a few years.
Mr Mees believes that the proposed deal will increase Aristocrat Leisure’s earnings before interest taxes and amortisation to 17% in the financial year 2023.
He notes that the strong sector growth will be driven by a North American market growing at a compound annual rate of nearly 50 percent as more US states liberalise online iGaming.
Reverend Tim Costello serves as chief advocate for the Alliance for Gambling Reform. This umbrella organization includes more than 60 groups who aim to stop harm from betting.
He warns, “I can be alone drinking, and playing real money gaming,”
It is currently illegal to play casino games or roulette in my home. It is absolutely devastating. What is a poker creator?