Galaxy Gaming acquires Prime Table Games

LAS VEGAS, Nevada -- The Global Gaming Expo is often a game of one-upmanship among gambling equipment suppliers that use the industry's largest annual gathering to roll out new products or make major corporate announcements.

A Las Vegas-based table game company beat the big slot machine makers to the punch.

Monday, on the eve of G2E, Galaxy Gaming announced it was acquiring British-based rival Prime Table Games for $23 million. The transaction gives Galaxy, which distributes dozens of unique table games to casinos worldwide, a larger slice of the market.

The deal allows Galaxy to add more than 20 table game titles to its portfolio, including the rights to distribute Three Card Poker in the United Kingdom.

"Our strategic focus is on building recurring revenues," Galaxy Gaming Chief Executive Officer Robert Saucier said in a statement. "This acquisition is 100 percent accretive and is exactly on target with that mission."

Galaxy plans to display some of Prime Table Games products, along with games being acquired from Lakes Gaming in a separate transaction, in its booth at the G2E, which formally kicks off today .

The convention and trade show is at the Sands Expo and Convention Center for the first time after a decade at the Las Vegas Convention Center. G2E is expected to attract about 26,000 attendees. The event runs through Thursday and is closed to the public.

Over the past few years, investors have viewed G2E with optimism, hoping new games and gambling products displayed would translate into sales. The revenues produced by gaming manufacturers have declined since 2008 beTcause of the economy. Casino operators have been reluctant to spend money for upgrades to replace their slot machine floors with new games.

Janney Montgomery Scott gaming analyst Brian McGill said an optimistic view is not evident going into Tuesday.

"Sentiment surrounding the equipment space is extremely negative," McGill said. "Investors went from believing replacements were going to improve to now thinking more along the lines of flat. This is the first time in a long time we think that expectations are not only realistic for the industry, now we actually think sentiment may have shifted a bit too negative for the group."

If there is a shred of hope among equipment makers, it's due to expansion opportunities in new and existing markets. The opening of casinos in Ohio, Kansas and Maryland will drive any growth in 2012.

Meanwhile, racetracks in Ohio and various locations in Illinois could be adding slot machinelike video lottery terminals, while Massachusetts lawmakers are considering a gaming bill that would allow four casinos in the state.

McGill said two companies, International Game Technology and Bally Technologies, would benefit from sales of games and systems to service Canada's provincial lottery markets.

"The improved outlook for the 2012 pipeline is a positive for all of the manufacturers," McGill said. "We do not expect to see a material increase in replacement sales going forward. The investment community is now borderline pessimistic on the outlook."

Still, G2E expects to be rich with industry news. The focal point of G2E is the trade show, which this year will cover 250,000 square feet and roughly 440 exhibitors, many of whom will dedicate all or part of their displays to Internet gaming.

Galaxy wasn't alone in the preshow announcements. Bally Technologies announced several new systems and slot machine contracts in the past week, including a systems deal on Monday in which the company will link 6,000 slot machines at Connecticut's Mohegan Sun casino.

Bally also announced a new business division, Bally Interactive, which will make the company's slot products available on mobile devices, the Internet and social media.

Also, IGT and Australian slot maker Aristocrat Leisure Ltd. announced a settlement to their intellectual property law suits. The companies will cross-license and joint market several products.

Galaxy Gaming's acquisition of Prime Table Games, which is subject to regulatory approvals, could double the company's revenue from games where it shares in profits with the casinos by the 2011 fourth quarter.

The key to the deal is Three Card Poker. Prime Table Games owner Derek Webb, who is considered one of the gaming industry's top table game developers, created the game. He sold the majority of the rights to distribute the game to Shuffle Master Inc., but retained control of the game in the United Kingdom.

Webb is a shareholder in Galaxy, which is publicly traded on the Over-the-Counter Bulletin Board.

"I have witnessed their commitment to increasing their distribution network," Webb said. "I believe … they will be able to fully leverage these assets to their fullest extent."

Last week, Galaxy Gaming agreed to acquire the table game assets of Lakes Gaming. The deal will give Galaxy four additional table game titles. Lakes Gaming operates casinos in the Midwest.

A sales price was not announced.