Ann: AGI Notice of General Meeting/Proxy Form-AGI.AX, page-31

Pokies king Len Ainsworth’s $500 million deal to sell his majority interest in Ainsworth Game Technology (AGI) has backed minority shareholders into a corner, analysts warn, as the potential for a full takeover has disappeared.

Morningstar analyst Ravi Reddy said there were a number of issues with the share sale, outlining that ideally there would have been an offer for all shareholders.

“Control is being passed with only Len Ainsworth receiving a control premium,” he said.
“
He is not willing to accept other offers so takeover potential is diminished. We are also uncomfortable with Len Ainsworth’s family members, who we estimate to have about a 9 per cent stake, being allowed to vote.”

Mr Ainsworth wants to sell his 52.5 per cent stake in the company to Novomatic at $2.75-a-share. The company is holding a shareholder meeting on June 3 to vote on a resolution to approve the sale. Shares in the company were $2.46 today.

Mr Reddy said that Mr Ainsworth did not appear to be motivated by money but rather appeared to want to have some continued influence over the business that he started. The analyst added that he did not believe that the final sale price was determined by as robust a bidding process as it would have if
Novomatic had bid for the entire company.

“We think the more important issue is under which ownership are minority shareholders more likely to be better off,” Mr Reddy said.

But Mr Reddy added that while he did not like certain aspects surrounding the share sale, on balance, there were more certainties and potential for financial benefits for minority shareholders by voting in favour of the subsequent tie-up with Novomatic.

He said the path to his fair value estimate would be more smoothly achieved under the backing of the large global Novomatic than as a stand-alone company.

“There are potential benefits for Ainsworth including access to the Novomatic games library, distribution of products via Novomatic channels, sourcing and scale benefits,” Mr Reddy said.

“Plus, having a major shareholder like Novomatic, which booked more than five times in research and development spend in 2015 than Ainsworth, puts Ainsworth in a better position to compete.”