When the stock price of gaming equipment provider Everi Holdings jumped almost 9 percent in the after-hours trading on Wednesday, the investment community took notice.
Bloomberg News reported that Las Vegas-based Everi was working with a financial advisor to solicit potential buyout offers, including several from private equity firms.
Analyst Barry Jonas of SunTrust
SunTrust Bank gaming analyst Barry Jonas said on Thursday the comments should not have surprised anyone. Everi’s management has been open about its interest in merger activity and Jonas told investors the remarks were “consistent with prior management commentary.”
Jonas said much of the merger or spin-off speculation has focused on Everi’s financial transaction services division. Everi was formed when financial transaction equipment provider Global Cash Access acquired slot machine developer MultiMedia Games in 2014 for $1.2 billion.
“Management has been clear that they and the board remain committed to evaluate any and all opportunities,” Jonas said.
Everi has been a focus of the investment community since January when the company extended the contract of CEO Mike Rumbolz for another two years through January 2021. Rumbolz’s agreement was due to expire this month.
Everi CEO Mike Rumbolz
Rumbolz, 64, was named interim CEO in February 2016 and was given the job permanently three months later. He has been credited with boosting the company’s financial performance and giving Everi a strategic direction.
Stifel gaming analyst Steven Wieczynski said in January Everi was one of his top picks for 2019. Jonas initiated coverage of Everi with Buy recommendation in February and speculated the company might consider some type of event with the financial technology side of the business.
“While merger and acquisition speculation has tended to focus on a potential sale/spin of Everi’s financial technology business, we see it natural that management would entertain offers for the whole business should that option best maximize shareholder value,” Jonas said last week.
Shares of Everi, traded on the New York Stock Exchange, closed the week at $11.73 after hitting a 52-week high of $12.24 on Thursday – the day after gossip flooded the investment community. On Thursday, the Seeking Alpha website reported analysts from Raymond James speculated Everi shares were worth $15 to $16 in a takeover scenario, an upside of 43 percent.
Everi is participating in the Craig Hallum Institutional Investor Conference on Wednesday in Minneapolis, which may lead to additional speculation.
In March, Everi expanded its financial services business when it spent $40 million to acquire Atrient Technology, including the company’s self-service kiosk and marketing platform technology. Part of the transaction included Everi acquiring more than 50 customer contracts in 100 casinos from Atrient.
Rumbolz said during the company’s fourth quarter conference call the technology “will add complementary products and services to our fintech business. We believe these assets will expand our market position and help us to accelerate growth in revenue and adjusted (cash flow).”
Jonas reiterated his Buy rating for Everi’s shares, saying “we continue to see solid fundamentals in the games business, a ramping free cash flow profile driving deleverage, and potentially accretive tuck-in financial technology mergers and acquisitions, which should all help drive multiple appreciation.”
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
