IGT Said to Be Eying WagerWorks for Acquisition

Is International Game Technology (IGT) positioning itself to acquire online gaming software supplier WagerWorks? Neither of the Nevada-based companies is commenting, but according to numerous reports, a $50 million deal could be in the works.

Reports coming out of London, where WagerWorks recently set up a satellite office (a move rumored to be in preparation for an IPO), indicate that IGT, the world's largest slots manufacturer, hopes to have a deal finalized by week's end.

WagerWorks executives are reportedly sizing up their options and deciding whether they want to accept an IGT buyout or proceed with the float in London.

A buyout would make IGT the first company with direct ties to the U.S. land-based casino industry to own an online gambling software supplier, and with its policy of only licensing its software to operators who don't accept play from residents in the United States, WagerWorks appears to be an ideal candidate for acquisition.

Both companies could be positioning themselves to corner the U.S. market should the legal climate turn friendly to online gambling. They already have an existing relationship, with WagerWorks providing software to run some of IGT's slot machines and IGT selling WagerWorks the online rights for the games Wheel of Fortune and The Price is Right.

A sale could also boost revenues for IGT, which is having a down year. The company reported net income of $114.7 million (on revenue of $579.6 million) for the quarter ending in June 2005, compared to $141.1 million (on revenue of $618.9) for the same period in 2004. The company attributes the 16 percent decrease to a decline in new casino openings in the United States.

During a conference call addressing the quarterly results, IGT Chairman and Chief Executive T.J. Matthews said 2005 was expected to be a slow year for orders.

"It's a tough operating market," Matthews said, "but we continue to execute well, both operationally and strategically."

He also said that the legalization of racinos in New York and Pennsylvania and the tribal casino markets of Florida, Oklahoma and Washington and a resurgence in California should help get the company back on track. The anticipated technological breakthrough with the development of server-enabled games, he said, should help as well.

WagerWorks has exclusively worked with operators from the land-based gaming industry. The company powers online casinos and poker rooms for Virgin Games, Get Minted, Blue Square, Skybet and Paddy Power, and previously provided software for MGM Mirage's short-lived online casino based in the Isle of Man.

Its most recently launched product is an online poker room launched this month by the World Poker Tour. U.S. players are not allowed to bet at the site, but are allowed to participate in the free-play games.

IGT declined to comment on the rumors, while calls to WagerWorks went unreturned.