Private Equity Transactions in Gaming Sector

1
(No Transcript)
2
Private Equity Transactions in Gaming Sector

• Gaming sector is attractive to private equity
  investors due to
• Favorable growth trends
• High margins
• Stable cash flows
• Thirst for growth capital
• Licensing has historically discouraged private
  equity investment
• Regulators unfamiliar with this investor class
• Licensing has begun to evolve to account for
  private equity structures
• As a result, significant private equity deal
  activity has recently taken place
• Deal sizes ranging from 300,000 to 28 billion

3
Private Equity Transactions in Gaming Sector

• Recently Large casino deals
• Licensing in a few jurisdictions
• Favorable financing due to real estate collateral
• Deal sizes justify incremental licensing costs
  and risk
• Next The middle-market
• No access to public capital markets
• Large number of middle-market gaming companies
• Licensing has been a more significant impediment

4
Private Equity Transactions in Gaming Sector
Casinos / Hotels
Equipment OEMs
Parts Suppliers

• Harrahs Entertainment - NYSE HET (Apollo
  Management and Texas Pacific Group)
• MGM Mirage - NYSE MGM (Dubai World)
• Riviera Holdings - AMEX RIV (Paul Kanavos,
  Robert Sillerman, Brett Torino and Barry
  Sternlicht)
• Penn National Gaming - NasdaqPENN (Fortress
  Investment Group and Centerbridge Partners)
• Station Casinos - NYSE STN (Colony Capital)
• Gold Reef Resorts(Ethos PE)
• Thomas Estates(Hermes PE / Mayfair Gaming)
• Mayfair Gaming
• (Hermes PE)
• Moliflor Loisirs(Bridgepoint Capital)
• Gala Coral Group(Permira Advisers)

• NOVA Gaming(Angelo, Gordon Co.)
• Games Warehouse(Harbour Group / Merit
  Industries)
• PokerTek Nasdaq PTEK(Magnetar Capital,
  Greenway Capital)
• Progressive Gaming Nasdaq PGIC(Undisclosed
  Large Mutual Fund)

• Advanced Electronic Systems, Inc.(Pfingsten
  Partners / Suzo-Happ)
• Starpoint Developments Ltd.(Pfingsten Partners /
  Suzo-Happ)
• Sadectronic S.A.(Pfingsten Partners / Suzo-Happ)

( ) Names in parentheses represent acquirors
Denotes deals announced but not closed
5
Private Equity Ownership Pros and Cons
PROS
CONS

• Financial capital
• Entrepreneur liquidity
• Future acquisitions
• Intellectual capital
• Active board-level input
• Firm advisors and network
• Sister portfolio companies
• Other firm resources (e.g. HR, sourcing)
• Become larger, more competitive
• Long-term perspective
• Management equity incentives
• Opportunity for second bite at the apple
• Company identity, management and employees remain
  mostly unchanged

• Relinquish control accountability to new owners
• Demanding environment
• With improvements will come changes
• Debt