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Article updated: 1/31/2013 9:46 AM

Scientific Games to buy Waukegan company WMS for $1.5 billion

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Scientific Games Corp. agreed to buy Waukegan-based WMS Industries Inc. for $1.5 billion, the biggest deal in the leisure and recreational-products industry in almost two years, to create a global supplier of video-lottery and gaming machines.

The offer of $26 a share is 59 percent higher than WMS's closing price yesterday. The transaction was approved by both boards unanimously, the companies said today in a statement.

With the deal, Scientific Games, which is 38 percent owned by billionaire Ron Perelman, a director since 2003, is expanding its offering of gaming machines for casinos. The New York-based provider of lottery instant tickets and lottery systems plans to share manufacturing, software and customer services with WMS to help save money.

The deal creates "a huge opportunity for revenue synergy and to market and sell each others products and to create new products," Scientific Games Chairman and Chief Executive Officer Lorne Weil said today on a conference call. "We are very complimentary."

Scientific Games surged 15 percent to $10.30 at 9:36 a.m. in New York. WMS jumped 54 percent to $25.17, its biggest intraday day gain since at least 1982. Competitors International Game Technology and Bally Technologies Inc. also advanced, gaining as much as 2.9 percent and 4.7 percent, respectively.

The transaction is the largest in the leisure and recreational products space globally since at least February 2011, according to data compiled by Bloomberg. Scientific Games is paying about 7 times WMS's earnings before interest, taxes, depreciation and amortization. That compares with the median of about 8.6 times for 26 similar deals, the data show.

Cost Savings

Excluding anticipated synergies, the companies generated combined revenue of approximately $1.6 billion in the trailing 12-month period ended Sept. 30, according to the statement. The acquisition is expected to be completed by the end of 2013.

Bank of America Corp. and Credit Suisse Group AG provided financial advice to Scientific Games. The two are also providing committed financing for the transaction alongside UBS AG. Macquarie Group Ltd. served as exclusive financial adviser to WMS.

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