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Howard Stutz

Progressive Gaming wants to sell table game business

6 March 2007

LAS VEGAS -- Casino equipment provider Progressive Gaming International said Monday it will try to sell its table game business to free up cash flow and pay down some notes that are coming due next year.

The Las Vegas-based company has asked Roth Capital Partners to assist in the sale.

Progressive Gaming owns the rights to more than a dozen specialty table games, such as Caribbean Stud and World Series of Poker Texas Hold 'Em Bonus Poker. The games are leased to casinos worldwide. No time frame or a predicted price was given on the potential sale.

In a statement, Progressive Gaming said it expected to retain certain rights to the games, such as wireless applications.

Jefferies & Co. gaming analyst Aimee Marcel-Remey said she thought a sale would fetch between $40 million and $50 million, which is based on 10 times the cash flow Progressive Gaming generates from the table games division. She said Shuffle Master paid 10 times cash flow when it acquired an Australian slot maker a year ago.

"That seemed to be a pretty good model for us to base a sales price," Marcel-Remey said in advising investors on how to look at Monday's announcement. "We backed out what Progressive earns from table games as about $4 million to $5 million in cash flow."

Marcel-Remey said Progressive Gaming would be better off selling its table games division and concentrating on its other businesses, such as providing casino's with jackpot systems, table game identification systems, the company's Rapid Bet Live sports wagering system and mobile and wireless gaming.

"The operating structure for the company's hardware-based division is expensive," Marcel-Remey said. "Divesting of this division would create a more efficient operating structure and would allow management to focus on its current systems business."

Progressive Gaming said it would use some of the proceeds from a sale to pay down all or part of its 11.875 percent notes, in which the company pays about $7 million annually in interest. Proceeds would also go toward working capital and to fund other growth initiatives.

Meanwhile, Progressive Gaming reported fourth quarter earnings late Monday, saying it lost 29 cents per share for the period that ended Dec. 31, compared with a loss of 22 cents per share a year ago. In the quarter, the company's total revenues were $16.7 million, compared with $19.2 million in the fourth quarter of 2005.

Progressive Gaming President Russel McMeekin said a sale of the table games business would allow the company to be a true systems provider, focusing on technology.

"A transaction will not be expected to have an impact on any of our other strategic initiatives; including our central server product, peer-to-peer poker or our planned wireless and mobile gaming initiatives through our partnership with Cantor Gaming," McMeekin said.

McMeekin said the company has completed several transactions since 2004.

"We have considered the sale of this business on prior occasions and determined that it was best to wait until the market position ... in Macau (was) well established," McMeekin said. "We believe these games are positioned for growth and believe the timing is appropriate to maximize the value of these assets."

Progressive, which was hit with a $39 million judgment in a federal antitrust lawsuit in February, settled another case with a rival gaming manufacturer last week.

Progressive Gaming had a little more than $7 million in cash on the company's balance sheet as of the end of December.

Shares of Progressive closed at $7.21, down 33 cents, or 4.88 percent, in trading on the Nasdaq National Market.