Monday, Aug. 19, 2002 | 11:05 a.m.
SUN STAFF AND WIRE REPORTS
Aristocrat Leisure Ltd. of Sydney, Australia, said today its U.S. subsidiary is buying Hanson Distributing Co. of Bloomington, Minn.
Terms weren't disclosed for the purchase of the privately held company, which has been an Aristocrat distributor in the Upper Midwest since 1990.
Hanson owner Scott Nelson will join the U.S. subsidiary, Aristocrat Technologies Inc. of Las Vegas, as general manager of Aristocrat's Midwest region.
"Bringing the Hanson organization into the fold is a key part of our commitment to realign our entire organization to work in partnership with our customers," Aristocrat President Mark Newburg said.
Separately, Aristocrat, the world's second-largest slot machine maker, has to accelerate sales this year to meet its forecast for a sixth share of the U.S. market, analysts told Bloomberg News.
Second-half sales in the United States would have to exceed 5,500 slots, more than it sold in the first half, to allow the manufacturer to get 15 percent of the market, which is forecast to be 70,000 slots in 2002, analysts said. Its stock fell 10 percent last week on concern it won't meet its target.
Aristocrat last year began selling its slots in Nevada, the world's largest gaming market. It competes in the United States with Nevada-based International Game Technology, the world's biggest slot company, and Illinois-based WMS Industries Inc., the third largest.
"People thought it was an aggressive number, but it put it out there and people will hold them accountable to it," said David Leslie, a gaming analyst at Deutsche Bank Securities. Aristocrat figures of 4,489 first-half U.S. sales, released last week, show the company "clearly didn't deliver" on its target, he said.
The stock has lost a fifth of its value this year and fell 1.9 percent to A$5.20 Friday. Leslie, who has a "buy" on Aristocrat and a 12-month target price of A$5.50, said the company may have to sell as many as 7,000 units through Dec. 31. "It's achievable," he said.
Aristocrat Chief Executive Des Randall said last week he couldn't say if the company was reaching its U.S. target. "We do believe we have been very, very close."
The company, which is seeking 20 percent of the U.S. market within three years, had first-half sales of 4,489 slots. That amounts to 10 percent of second-quarter U.S. sales, analysts said.
Randall, who describes the United States as the company's growth engine, plans to comment about the outlook when Bear Stearns & Co. releases its annual slot machine report during the Global Gaming Expo in Las Vegas between Sept. 17 and Sept. 19.
Aristocrat stock may extend its decline "unless the company can convince the market that the full-year targets are still achievable," said Paul Facey, a Merrill Lynch & Co. gaming analyst in a report this week.
Aristocrat has said it will need to take market share from International Game and to get approval to sell in more U.S. states to boost its presence.
This year, 21 U.S. states have debated changing laws to expand gaming, said William Lerner, a gaming analyst at Prudential Securities Inc. in New York. Pennsylvania and New York states may allow racetracks to install slot machines, he said.
"There could be some good news in the fourth quarter, which will benefit all of the suppliers," Lerner said. Kentucky, Pennsylvania and Ohio could decide to expand gaming as early as November, he said.
Analysts estimates of sales of U.S. electronic game machines in the second quarter range from 20,000 to 28,000, depending on whether they include video lottery terminals.
Deutsche's Leslie said his calculations indicate Aristocrat sold about 2,500 slots in the second quarter, accounting for 9.1 percent of sales of about 28,000 machines. Merrill's Facey estimated Aristocrat's share was 6.4 percent in the latest quarter.
Steve Wheen, a gaming analyst at Macquarie Equities Ltd., estimated the Australian company's sales in the second quarter translated into a 12.4 percent market share.
The 100-page Bear Stearns report scheduled for release next month will analyze slot makers worldwide, said Michael Tew, a gaming analyst at the New York-based bank.
About 25,000 slot machines, excluding video lottery terminals, were sold in the second quarter, Tew said.
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