DEQ's Table Product Portfolio Complements Scientific Games'
Leading Table Solutions to Offer More Robust Portfolio for Casino
Pit
- Acquisition strengthens Scientific Games' table products
offering, adding to the Company's "one-stop-shop" for casino
operators
- Adds more proprietary table games and table progressive systems
to Scientific Games' rich table solutions library
- DEQ's intellectual property licensing drives high margin
long-term recurring revenue
- Transaction expected to be accretive to earnings and operating
cash flow to Scientific Games in 2017
LAS VEGAS and LEVIS, QC, Aug. 31,
2016 /CNW/ - Scientific Games Corporation
(NASDAQ: SGMS) ("Scientific Games" or the "Company") and DEQ
Systems Corp.(TSXV: DEQ) ("DEQ"), today announced that they have
entered into a definitive agreement (the "Agreement") under which
Scientific Games will acquire all of DEQ's issued and outstanding
common shares for a cash payment of CAD$0.38 per share.
The transaction is expected to close in the fourth quarter of
2016 or the first quarter of 2017, subject to approval by DEQ's
shareholders, receipt of gaming approvals in certain jurisdictions,
and other customary closing conditions. DEQ generated revenue of
CAD$9.5 million with gross profit of
CAD$8.1 million on a trailing
12-month basis for the period ended May 31,
2016.
Scientific Games Senior Vice President – Table & Utility
Products Roger Snow said, "The DEQ team has grown a fantastic
business focused on providing revenue-generating and entertaining
solutions for casino operators around the world. Their established
and high-performing library of table games, table progressives, and
random bonusing systems will enhance our offerings, add to our
recurring revenue base, and provide even more ways for casinos to
engage players through Scientific Games' extensive end-to-end
casino portfolio of gaming machines, casino systems, table
products, and interactive solutions. We're especially excited about
DEQ's EZ Baccarat®, the world's leading baccarat brand
with nearly 800 table games in 150 casinos worldwide."
Scientific Games, already a leader through its successful and
proven Shuffle Master brand, now adds depth and breadth to
its portfolio with the acquisition of DEQ Systems' table games and
table game progressives, including its suite of table progressives
which provide a recurring revenue stream.
DEQ Systems President and Chief Executive Officer Joseph Bertolone said, "We believe that this is
a very good transaction for our company. We look forward to working
closely with the Scientific Games team to ensure a smooth
transition and continued innovation for gaming operators and their
players around the world. I am incredibly proud of the entire team
at DEQ for all that we have achieved."
Transaction Details
The acquisition of the shares of DEQ will be completed by a
court approved plan of arrangement under the Canada Business
Corporations Act (the "Arrangement") and will require the
approval of 66 2/3 percent of the votes cast by DEQ shareholders at
a special meeting of shareholders of DEQ expected to be held in
late October or early November.
All of the directors and executive officers of DEQ have entered
into support agreements pursuant to which they have agreed to vote
in favor of the Arrangement.
In addition to the requisite shareholder and court approvals,
completion of the Arrangement will be subject to certain regulatory
approvals, including that of the TSX Venture Exchange and the
satisfaction of certain other closing conditions customary for a
transaction of this nature.
The Agreement contains customary representations and warranties
of each party and interim operations covenants by DEQ. The
Agreement includes customary deal protections, including a covenant
of DEQ not to solicit other acquisition proposals and a right to
match provision in favor of Scientific Games.
Recommendation of the DEQ Board of Directors
DEQ formed a special committee of independent directors to
conduct an exhaustive process to identify and evaluate a variety of
potential strategic alternatives to enhance shareholder value and
act in the best interests of DEQ as a whole. Based on the
recommendation of the special committee, DEQ's Board of Directors
unanimously approved the transaction and will recommend that its
shareholders vote in favor of the transaction. The DEQ Board has
determined that the Arrangement is in the best interests of DEQ
based on a number of factors, including a fairness opinion received
from Union Gaming Securities, LLC.
Information Circular and DEQ Shareholders Meeting
A management proxy circular for the DEQ special meeting of
shareholders is expected to be mailed to DEQ's shareholders in late
September or early October, providing shareholders with important
information about the transaction. Details of the transaction, as
well as the rationale for the support of the transaction by DEQ's
Board of Directors and a copy of the Fairness Opinion, will be set
out in the proxy circular.
A copy of the Agreement, the DEQ proxy materials and related
documents will be filed on DEQ's profile on SEDAR and will be
available at www.sedar.com.
Advisors on the Transaction
McMillan LLP is acting as legal counsel to Scientific Games.
Union Gaming Securities, LLC is acting as financial advisor to DEQ,
and Osler, Hoskin & Harcourt
LLP is acting as legal counsel to DEQ.
© 2016 Scientific Games Corporation. All Rights Reserved. All ®
notices signify marks registered in the
United States.
About Scientific Games
Scientific Games Corporation (NASDAQ:SGMS) is a leading
developer of technology-based products and services and associated
content for worldwide gaming, lottery and interactive markets. The
Company's portfolio includes gaming machines, game content and
systems; table games products and shufflers; instant and draw-based
lottery games; server-based lottery and gaming systems; sports
betting technology; loyalty and rewards programs; and interactive
content and services. For more information, please visit
ScientificGames.com.
About DEQ Systems
DEQ Systems Corp. (TSXV: DEQ) is one of the market leaders in
Table Games, Progressive Systems, Proprietary Table Games content
and Utility solutions. DEQ's systems and games are installed in
over 300 casinos, in 30 countries around the world. The
combination of our services, industry leading products and revenue
generation capabilities make DEQ a leader for innovation in the
table game bonusing segment of the global gaming market. For more
information, please visit www.deq.com.
Forward-Looking Statements
This press release includes "forward-looking statements" and
"forward looking information" (collectively "forward looking
statements") within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995 and Canadian securities laws.
Forward-looking statements describe future expectations,
plans, results or strategies and can often be identified by the use
of terminology such as "may," "will," "estimate," "intend," "plan,"
"continue," "believe," "expect," "anticipate," "estimate,"
"should," "could," "potential," "opportunity," or similar
terminology. These statements are based upon management's
current expectations, beliefs, assumptions and estimates and are
not guarantees of timing, future results or performance.
Similarly, statements herein that describe the proposed
transaction, including its financial impact, and other statements
of management's expectations, beliefs, assumptions, estimates and
goals regarding the proposed transaction are forward-looking
statements. It is uncertain whether any of the events or
results anticipated by the forward-looking statements (including
consummation of the proposed transaction) will transpire or occur,
or if any of them do, what impact they will have on the results of
operations and financial condition of the combined company or the
price of Scientific Games' or DEQ's stock. These
forward-looking statements involve certain risks and uncertainties
and other factors that could cause actual results to differ
materially from those indicated in such forward-looking statements,
including but not limited to: uncertainties as to the timing
of the consummation of the proposed transaction and the ability of
the parties to consummate the proposed transaction; the
satisfaction of the conditions precedent to consummation of the
proposed transaction, including the approval of DEQ's stockholders;
the ability to obtain required gaming approvals at all or in a
timely manner; litigation related to the proposed transaction;
disruption of current plans and operations as a result of the
proposed transaction; competitive responses to the proposed
transaction; unexpected costs, charges or expenses resulting from
the proposed transaction; the ability of Scientific Games to
integrate DEQ's businesses; the ability of Scientific Games to
implement its plans, forecasts and other expectations with respect
to DEQ's business after the completion of the transaction; and the
other risks, uncertainties and important factors contained and
identified (including under the heading "Risk Factors") in
Scientific Games' filings with the Securities and Exchange
Commission and under the heading "Business Risks and Uncertainties"
in DEQ's filings with Canadian securities commissions, any of which
could cause actual results to differ materially from the
forward-looking statements. The forward-looking statements included
in this press release are made only as of the date hereof and,
except for Scientific Games' and DEQ's ongoing obligations
under applicable securities laws, neither Scientific Games nor
DEQ undertakes any obligation to update any forward-looking
statements whether as a result of new information, future events or
otherwise. DEQ is responsible for the information in this press
release concerning DEQ and Scientific Games is responsible for the
information in this release concerning Scientific Games. Readers
are cautioned not to place undue reliance on any of these
forward-looking statements.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES
PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX
VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR
ACCURACY OF THIS RELEASE.
SOURCE DEQ Systems Corp.