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Australian Slot Maker Buys Casino Data Systems

CDS specializes in technology-driven products for the gambling industry. Its products include a casino management system called OASIS and a multisite progressive link system, allowing gambling machines in various venues to be linked to a central computer that allocates jackpots.

The deal is the second buyout of a small casino-equipment manufacturer in less than a month. In December, International Game Technology announced it would acquire Silicon Gaming Inc., a manufacturer of video slot products, for $45 million.

Aristocrat said it will initially fund the acquisition through cash and bank facilities that are to be arranged. The company currently has almost no borrowings. The acquisition of CDS will greatly assist the development of Aristocrat's business in the United States, Chief Executive Des Randall said in a statement. He added that the two companies have complementary businesses and are a logical fit.

The agreement is subject to regulatory approvals and the approval of CDS shareholders. The transaction is expected to close during the second half of 2001.

Steve Weiss, the founder and chief executive of CDS, and Mike Rumbolz, CDS' vice chairman, have agreed to vote their shares in favor of the transaction, Aristocrat said.

The price for Casino Data stock is a 7.2 percent premium to Casino Data's closing price Wednesday of $8.625. Casino Data hasn't been above $9 since 1996.

This morning, Casino Data fell to $8.56.

Speculation that Casino Data could be a takeover target began in early 1999 with the resignations of the company's chief executive officer and president. It was speculated at the time that the two were moved aside because the company was being positioned for an acquisition -- and Weiss referred to the company as a "good strategic partner."

The agreement could fast track Aristocrat's shift into the lucrative Nevada market. After years of trying to clear regulatory checks in that market, Aristocrat was finally cleared in August 2000 to make, distribute and operate machines in Nevada. The company plans to get its first machines operating in Nevada in the first half of 2001, with trials scheduled for February.

Analysts greeted the acquisition as a smart strategic move, but were more hesitant about the cost of the transaction.

According to Aristocrat's general manager of marketing and business development, Gavin Isaacs, Casino Data is expected to report a profit of around $17 million for 2000. He said the deal's impact on earnings will be negligible. Steve Wheen, an analyst with Macquarie Equities, said that based on an early look at the deal, it appears to have strategic appeal, offering Aristocrat added scale in the United States.

Casino Data has good relationships with a number of Indian tribes, said Wheen. The acquisition helps Aristocrat's chances at getting its product out into the Indian reservations, he said.

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