Monday, April 1, 1996 | 11:59 a.m.
The proposed merger between Alliance Gaming Corp. and Bally Gaming International Inc. remains on schedule, an Alliance executive said today.
Shareholders of Alliance, a Las Vegas-based slot-route operator, and Bally, which makes and sells slot machines in the United States and Europe, will vote Tuesday in separate sessions on motions to approve the merger.
Though there was speculation Alliance has had difficulty raising the $180 million it said was needed to acquire Bally, an Alliance executive said today that isn't the case.
"We are in the process of making financial arrangements," said Johnann McIlwain, Alliance vice president. "Our plan all along has been to go out on the road after the shareholders vote and raise the money."
She said the company's investment banker, Donaldson, Lufkin & Jenrette Securities Corp., "has been positive" about Alliance's ability to raise the money.
Since 1993, the companies have posted more than $63 million in combined losses, and potential investors may have questions about the merged company's ability to generate sufficient cash flow to pay debt service of $57 million a year.
Directors of both companies have approved the merger, saying Alliance could acquire Bally at a reasonable price, gain a higher profile in the gaming industry and "apply its technological expertise to maximum effect" in developing and marketing new video games worldwide.
The companies also said they could realize about $5 million a year in savings, which presumably would include some layoffs. Alliance employs about 1,240 workers, Bally 940.
But they noted that the merger would "require incurrence of substantial amounts of relatively high-cost debt and issuance of large amounts of equity," according to the proxy statement mailed to shareholders of both companies.
Alliance is Nevada's largest slot-route operator, with more than 5,000 gaming devices in bars, restaurants and convenience stores. It also has interests in small Nevada and Mississippi casinos and provides poker machines in Louisiana. The company lost $10.8 million on sales of about $132 million in fiscal 1995.
Bally Gaming is a slot-machine and video-game manufacturer that derived about half of its $250 million in 1995 revenue from a German subsidiary. It posted a $3.4 million loss for the year.
The merger agreement calls for Alliance to pay Bally Gaming shareholders cash and stock totaling $11.70 for each share of Bally common. That would include $7.83 in cash, $3.57 worth of a preferential Series B Special Stock and 30 cents worth of Alliance common. Bally common closed at $8.875 a share Friday, up about 31 cents, while Alliance was at $4.625, unchanged.
To proceed with the merger, Alliance said it needs to raise $180 million, including at least $100 million in bank loans, $40 million through the sale of additional common stock and $40 million through the sale of Series B stock.
A common stock offering, coupled with the shares distributed in a merger, would boost Alliance's outstanding common to 26.3 million from the current 13 million shares held by about 1,600 stockholders. Alliance already owns 1 million of the 10.8 million Bally shares outstanding.
Alliance said it planned to use $76.7 million of the financing for the cash payments to about 370 Bally shareholders, and $69.9 million to "refinance" Bally debt. The remainder would be used for working capital and to pay $15 million in financing fees and commissions.
As of Dec. 31, Bally had long-term debt of $55 million, including $39.7 million of 10.375 percent senior secured notes due in 1998. Alliance long-term debt of $96.1 million included $85 million of 7.5 percent convertible debentures due 2003.
"Failure to obtain close to $180 million in financing might leave the combined company without enough working capital, making it impractical to proceed with the merger," the company's proxy statement said.
That could be costly to Bally executives and shareholders who, along with Alliance shareholders, are set to vote on the acquisition Tuesday. Bally's annual meeting is set for 9 a.m. at Alexis Park, while Alliance's meeting is to begin at 2 p.m. at Sam's Town.
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