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Scientific Games buying IGT online system

Sep 16, 2003 6:20 AM

In what Wall Street viewed as a positive development, Scientific Games Corporation (SGMS) has agreed to buy the Online Entertainment Systems Inc. from International Game Technology (IGT) for $143 million in cash.

IGT OnLine operates on-line lottery systems in seven states and in the Caribbean, and supports systems sold to customers in Korea, Norway, Switzerland and Shanghai. It has annual revenues of $140 million.

The acquisition includes IGT OnLine’s Advanced Gaming System video lottery system contracts, certain intellectual property and an exclusive license to certain of IGT’s slot brands for instant and on-line lottery games.

Scientific Games’ Chairman and CEO Lorne Weil said he believed the "primary beneficiary of this transaction will be the lottery industry customer base."

Wall Street investors rewarded SGMS by boosting the company’s share price to the $12 level.

In another transaction that received far less publicity, IGT agreed to sell United Tote to an investor group involving some of United Tote’s senior management and the New York-based Kinderhook Industries. Terms of the deal were not disclosed.

Kinderhook is a private equity investment firm that specializes in acquiring non-core divisions of large public companies, according to a United Tote press release.

Leading the management group in the acquisition was Joe Tracy, United Tote chief executive officer.

As part of its most recent fiscal quarterly filing, officials of IGT said they were negotiating for the sale of United Tote and expected the transaction to be completed before year end.

United Tote is the country’s second largest provider of wagering totalizator equipment to pari-mutuel racetracks behind Autotote, a subsidiary of Scientific Games Corporation. The other major player in the industry is privately held American Tote, which recently agreed to sell a one-third interest in the company to Magna Entertainment Corp. (MECA).

IGT acquired United Tote when it purchased Anchor Gaming in December 2001.