Austria's Novomatic plays the long game for Ainsworth jackpot
The Austrian suitor lobbing a $500 million offer for Len Ainsworth's poker machine empire says it will quickly win back market share from rival Aristocrat Leisure if its buyout deal is approved by minority investors.
Novomatic, the second-largest global pokie operator, has flown its top Vienna-based executives to Sydney this week to hold private talks with Ainsworth Game Technology shareholders.
The gaming giant hopes to convince minority investors
to approve its bid to buy Mr Ainsworth's 53 per cent stake in the pokie player at a price of $2.75 a share or $473 million.
Thomas Graf is the son of Novomatic's billionaire owner Johann Graf and its chief technology officer.
He said giving Ainsworth access to its 2000-strong research and development unit would give it much greater clout to compete with Aristocrat and international giants including IGT, Bally and Scientific amid a wave of consolidation in the industry.
"With so much consolidation, we all know it becomes more and more a numbers game going forward," Mr Graf told Fairfax Media. "We think by using the 2000 R&D experts in our group it will enhance the product offering and I think this is a realistic scenario to gain market share over Aristocrat going forward."
While Ainsworth had some notable wins in the Australian market several years ago, Macquarie said in April that Aristocrat
was now dominating the critical New South Wales and Queensland pokie markets.
The two are also aggressively competing for market share in North America.
Novomatic gave a sense of its scale after committing last week to buy 2000 poker machines from Ainsworth in the next two years for use in its own European casinos and clubs.
And it estimates the overall tie-up, if successful, would boost Ainsworth's revenue by $23.8 million in the 2017 financial year and $55.7 million in the 2018 financial year.
While the board has recommended the transaction, it will only proceed if more than 50 per cent of
Ainsworth's minority shareholders vote in favour of the deal at an extraordinary general meeting scheduled for June 3.
A key sticking point is whether Mr Ainsworth's wife, Gretel Ainsworth, might be able to vote her 8.8 per cent stake in the company
in favour of the deal.
Novomatic's senior team will not be drawn on the issue but they say regardless they are confident the deal will be approved by investors.
"We believe the benefits to both sides are so big, we are expecting a positive vote in June," Novomatic's chief executive Harald Neumann said. "We are focusing our energy on getting a positive vote. That's the reason why we came here and that's the reason for the meetings with investors."
Some minority investors
are agitating for a full takeover of Ainsworth questioning why the pokie maker had not demanded the same $2.75 a share price for the rest of the company's register.
But Novomatic cited a demand made by Mr Ainsworth that the company remains Australian listed and at least partly in public hands.
"For Len I think it was important the company remains Australian listed and accessible for Australians to participate in the growth. It has become like a guarantee for the future of Ainsworth as a business," said
Mr Neumann. "The gaming industry becomes more and more global. But whenever we acquire, we want to keep the business as local as possible."
Mr Graf also pointed to the likely lag for the deal to be completed with Novomatic executives requiring probity clearances from regulators in Australia and the US, which is likely to take in excess of 12 months.
"An offer can only be valid for 12 months in Australia and there is a very high probability the licence issues and approvals will take even longer," said Mr Neumann.
"Our contract with Len remains open to the end of 2017. So it means he will not get any money before this date. This is something most of the other shareholders would never accept – to wait such a long period for receiving the share funds."
While Novomatic started its pursuit of Mr Ainsworth in early 2013, Mr Graf said his father had known the 92-year old pokies king for several decades and the two had long admired each other's gaming acumen.
"It goes back several decades for sure," said Mr Graf. "There were several occasions where my father met with Mr Ainsworth and they exchanged their knowledge of the industry. And I think they always appreciated what each other had accomplished during their career – obviously operating in different parts of the world – but always acknowledging what each has achieved."
They haven't contacted me but the again I'm in the minority of the minorities.
