Missoula gaming company, Century Gaming Inc. goes big time

Century Gaming Inc. agrees to buy largest operator in Nevada

The state’s largest video-gaming route operator, Century Gaming Inc. of Missoula, has agreed to buy Nevada’s largest gaming operator.

By MICK HOLIEN of the Missoulian

The purchase of 8,200 video poker, keno and slot machines from United Coin Machine Co., a subsidiary of Alliance Gaming Corp., more than quintuples the size of Century Gaming, which owns 1,800 of Montana’s 18,000 keno and poker machines.

"While it’s substantially larger in size, the fundamentals of the business are very similar," said J. Grant Lincoln, Century’s president and chief operating officer.

The purchase, for an estimated sales price of $127 million, includes about $103 million in cash, $18 million in preferred stock and assumption of $6 million of liabilities.

Lincoln said the purchase was a unique opportunity.

"It’s the largest and most stable market in the world," he said of Nevada. "If it’s your business and it’s what you know, it’s the market that you ultimately should end up in."

United Coin’s approximately 600 workers will be retained, as will the entire management team.

Bill Nader, United’s current president, will retain his duties and operational responsibilities as senior vice president and general manager of Nevada operations. He also will assume a seat on Century’s board.

"We did end up with a very good management team that’s in place, said Lincoln. "They’re not going to have a lot of stock down there, (but) the key people will be buying into positions with us."

Lincoln said the purchase is part of a long-term strategy for Century and will in the short term have little effect on the company’s Montana operation. Steven Artnzen in Billings, however, will assume the title of senior vice president and general manager of the company’s entire Montana operations.

But the move to being a major player in Nevada eventually should benefit the Montana operation.

"We have a good relationship with Bally down there now, so there’s that possibility," said Lincoln. "There’s some technology that wouldn’t be applicable up here but some day may be applicable."

But unless there’s a change in the state’s gaming regulations, Lincoln said he doesn’t anticipate much growth in the gambling industry in Montana.

"The Montana market is fairly mature," he said. "Montana will be pretty static throughout."

Century has been looking to buy a couple of smaller operations in Nevada for more than a year, but the United opportunity, a much larger scale operation, kept surfacing.

"This was about the only entry to get into the market," said Lincoln.

About two-thirds of United Coin’s machines are in southern Nevada, near Las Vegas, with the remainder in the Reno/Elko area.

"They’re basically statewide, but the concentration is in those two areas," said Lincoln.

The deal was in conjunction with the Alliance sale of two other assets and left the Nevada company to focus on its core business, Bally Gaming, which makes and sells slot machines.

As part of the transaction, United Coin must achieve a minimum cash flow of $21 million during a specific period prior to the deal’s close.

Century, which lined up partners to fund the purchase, plans to file Nevada gaming license applications late this summer and plans to acquire the United route by spring, 2004.

"The licensing obviously is a large criteria down there," said Lincoln.

Mick Holien can be reached at 523-5262 or at [email protected]

http://missoulian.com/articles/2003/07/16/news/local/news04.txt

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New owner to retain United Coin employees

Alliance selling unit to Montana slot route operator

By Liz Benston

LAS VEGAS SUN

The Montana company purchasing United Coin Machine Co. from slot manufacturer Alliance Gaming Corp. said it expects to retain all of the 600 or so workers employed by United Coin, Nevada’s largest slot route operator.

Alliance on Wednesday said it would sell United Coin to Century Gaming Inc., Montana’s largest slot route operator, in conjunction with two other asset sales aimed at focusing on its core business of making and selling slot machines.

Investors reacted favorably to the deal, pushing shares of Alliance up $1.25 to $20.26 Wednesday.

United Coin President Bill Nader will become senior vice president and general manager of Nevada operations and will assume a seat on Century’s board as part of the transition, Century President and Chief Executive Officer J. Grant Lincoln said.

Century has lined up partners to fund the purchase, with financing contingent upon obtaining gaming licenses in Nevada, Lincoln said.

He declined to comment on the company’s long-term strategy once the deal is finalized. Century, which employs about 40, has been eyeing a deal with Alliance for at least nine months, he said.

Returns in the other two units expected to be sold — Louisiana slot route operator Video Services Inc. and German gambling machine maker Bally Wulff — have long trailed profits generated by the company’s growth engine and best-known brand, Bally Gaming and Systems.

The Bally unit — which reported a 43 percent increase in revenue driven by game sales that were up 50 percent for the quarter ended March 31 — has a well-known brand that is emblazoned on tens of thousands of machines nationwide.

Century Gaming, founded in 1986 with the legalization of gambling machines in Montana, will acquire 100 percent of United Coin stock by early 2004, the companies said. The deal will be worth roughly $127 million, including about $103 million in cash, $18 million in preferred stock and $6 million in debt.

United Coin, founded in 1958, operates about 8,000 video poker, keno and slot machines in various outlets statewide such as grocery stores, gas stations and convenience stores. It is known locally for operating the "Gamblers Bonus" slot club program.

The transaction is subject to several conditions, including that it achieve a minimum cash flow of $21 million during a specific period prior to closing and that Century achieve necessary licenses from Nevada regulators.

The purchase is an opportunity to acquire a slot route operator with a "proven track record, an experienced management team and a substantial base of proprietary technology," Lincoln said.

"We also will continue to look at new opportunities to further enhance our position as the industry leader," he said.

Alliance also intends to sell its 49 percent stake in Video Services, a slot route operator in the New Orleans region, to Gentilly Gaming LLC by June 30, 2004. VSI operates about 710 machines in nine off-track betting parlors in the region. Alliance intends to sell all of its VSI stock to Gentilly, a newly formed company of New Orleans investors. The companies didn’t disclose the cost of the transaction.

Revenue for the Nevada slot route fell 5 percent and cash flow fell 29 percent for the quarter ended March 31. Revenue for the Louisiana route fell 7 percent and cash flow fell 25 percent.

The third subsidiary, European manufacturer Bally Wulff, will be sold to an unnamed private equity investment group for $16.5 million in cash. The deal is expected to close by July 31. Alliance said it will take a charge on the sale in the second fiscal quarter to reflect the unit’s declining value.

Alliance also is reviewing plans to refinance debt issues worth $190 million and $150 million by the first fiscal quarter of 2004, which would result in a pre-tax charge of about $12 million.

In April, Alliance raised its earnings-per-share estimate for fiscal 2003 to 88 cents based on the strength of Bally Gaming. Including a 20 cent charge for the write down of Bally Wulff, earnings would be 68 cents, the company said Wednesday. The company anticipates earning about 80 cents per share from its Bally Gaming and Systems unit and about 8 cents from its soon-to-be discontinued operations this fiscal year.

Alliance executives for years have discussed the possibility of selling the units.

"This is the culmination of several years of planning" since around 1999, Bally Gaming Vice President of Marketing Marcus Prater said.

That was the year the company’s former chief executive, Morry Goldstein, left the troubled company and appointed Bob Miodunski as chief operating officer.

The company called off a planned sale of United Coin in 2001, saying the slot route generated a significant and steady cash flow for the company. The company hoped to use the cash to pay down its then-crippling debt load.

The Bally Wulff division has been a cash drain for Alliance for some time. But the company had held off from selling it because its value would be dampened by poor performance.

Under Miodunski, the company decided to cut costs and reduce debt while focusing on its Bally unit, Prater said.

The company has revised its fiscal year earnings guidance for 2004 to reflect the anticipated refinancing charge. The company expects to earn $1.10 per share for the year, or 94 cents including the refinancing charge of 16 cents per share. The figures don’t include an expected gain of 65 cents per share from the United Coin sale by March 2004.

The future of VSI’s 60 or so employees is too early to determine because that deal is further off, Prater said.

The Bally Wulff deal is expected sooner but the investment group is still formulating its management strategy, he said. The Berlin-based subsidiary employs about 300 people and makes wall-mounted gambling machines specifically for the German market.

Unit revenue fell 8 percent and cash flow dropped 38 percent for the quarter ended March 31.

http://www.lasvegassun.com/sunbin/stories/text/2003/jul/03/515296642.html