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GTECH gets ready to buy

Nov 2, 2004 4:17 AM

Company executives were not specific about the use of their capital but GTECH Holdings Corporation (GTK) announced last week that it has increased its senior revolving credit facility from $300 million to $500 million.

But that hasn’t stopped analysts from speculating on the use of the funds.

"Without question," said one observer, "they are planning an acquisition but won’t specifically identify the company or the object of their interest. But, just look at the company statement and that pretty well tells you what they have in mind."

In the statement, GTECH said, "The new credit facility will continue to provide us with substantial financial flexibility, and combined with our strong cash flows, will provide a considerable pool of capital as the company continues to execute its business strategy."

Speculation on the company’s interest has focused primarily on an equipment manufacturer, one that would complement its recent purchase of Spielo.

Because of its recent operational problems an obvious target of speculation has been Alliance Gaming Inc. (AGI). Since pre-announcing a poor quarter for the period that ended on Sept. 30, the company has seen its share price plummet from the $20 area to under $10 a share. That was quite a fall for a company whose 52-week high was upwards of $32 a share.

But one respected market observer noted that although AGI may be a target in the future it just may be too soon since the company is in the midst of reorganization. It recently replaced its CEO with an individual with recognized ability to turn poor operating companies around.

Seen as a better target, he said, is Multimedia Games Inc. (MGAM), a major manufacturer of Class II machines that are used primarily by Indian casinos and whose video lottery terminals and tribal lottery business might fit well with Spielo.