Ann: AGI Notice of General Meeting/Proxy Form-AGI.AX, page-8

Hi all,

My initial question with this deal is why is Len selling his stake at a time when the share price is undervalued... further to this stating he would not sell to no other party other than Novomatic?  A shrewd business man would want the best financial outcome.
So this led me to believe for Len is not about the money its about the legacy. He is a realist and knows his time on earth is coming closer to an end. He believes that the Novomatic opportunity is the companies best bet to grow and for the company he founded to continue to prosper leaving his  name being remembered... Why would he want to be remembered as the bloke who looked after himself and screwed shareholders at this stage of his life.

I read the report which further confirmed to me that its about legacy... Don't get me wrong Novomatic is getting the company on the cheap... my DCF is $3.09 to which Novomatic should pay 30% premium on this and there is  the fact minority shareholders don't get this offer or the  highest offer by complete takeover. But this only effects short term investors.. Long term they will be rewarded. Novomatic did the smart thing in making the offer while the shares were unloved and convinced Len about their intentions.

Key points of the report:

• both companies can penetrate geographic areas they no or minimal presence
• Novomatic brings purchasing power on parts
• they can share libraries
• Novomatic have agreed to purchase 1000 units in each year for 2017 and 2018
• Novomatic has given AGT exclusivity in AUS and NZ for their products which may help with loss of market share in AUS...
• Novomatic will give exclusivity in North America based on minimal purchase agreement
• Other areas no exclusive agreement given
• Novomatic opens online market for AGT

The actual EPS  increase is hard to calculate as there are so many variables. I do believe there will be significant upside. The key will be the transfer pricing among the companies. From AGT perspective we need to watch the margins... The more sinister would suggest that Novomatic will ensure that they keep a majority of the gains... There are transfer pricing laws plus share holders can keep a check on margins...

If there was no Novamatic offer on the table ... AGT  will continue to struggle with innovation and margins... I had a look at the A600 for a new machine it looked primitive against the aristocrat...Margins suffering due to purchasing power. America has been the shining light however over all growth for AGT has been flat... so I would say it would be some time before the shares are loved again.

In conclusion the Novomatic proposal is the best bet in my opinion.