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Australian Slot-machine Manufacturer Bets on American Indian Casinos

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Australian gaming machine maker Aristocrat Leisure Ltd has agreed to buy privately owned Video Gaming Technologies (VGT) for US $1.28 billion in cash.

Franklin, Tennessee-based VGT makes slot and bingo machines primarily for tribal casinos. VGT has approximately 20,200 machines on lease to Indian casinos in Oklahoma, Washington, California and beyond. The Oklahoma tribal gaming market accounts for approximately 50 percent of its total installed base of Class II gaming machines in the US. VGT reported its revenue at $236 million for the December 2013 year-end with a staff of 610, states VGT.

VGT has long-term relationships with the major tribal casino operators in its key regions of operation. Many relationships extend more than 10 years from the time that VGT released its first Class II gaming product in 2002. VGT maintains good customer relations by servicing machines, on-site, at customer venues.

Aristocrat's market value is just under US $2.8 billion, with products and services are available in over 90 countries around the world. The Australian company anticipates the new acquisition will immediately boost its earnings.

Aristocrat intends to fund the purchase and refinance its existing debt through two new debt facilities. 

"The strategic and financial benefits are compelling for Aristocrat shareholders," said Jamie Odell, Aristocrat's chief executive. "VGT has a complementary product offering and provides a unique opportunity to accelerate our growth in the US recurring revenue segment, which has for some time been an important strategic objective of Aristocrat."

Aristocrat already has about 8,200 machines installed in North America, in addition to a range of products for gamers. 

Aristocrats' purchase is part of a larger industry trend toward consolidation in attempt to win a bigger share of the global gaming market, reported WSJ.