It seems that Inspired Entertainment are keeping quiet about their latest play to acquire a complementary gaming company. It’s no doubt that the M&A specialists have a laundry list of acquisitions in mind, however, to make a bid for a company without confirmation of the fact externally poses a few questions.
News broke in early August that Inspired Entertainment Inc (NASDAQ: INSE) had made a bid to acquire PlayAGS Inc (NYSE: AGS), in a move that wouldn’t surprise those in the industry. With Inspired’s long list of acquisitions, the bid is a fairplay strategy from the gaming company that can seemingly do no wrong.
Who is PlayAGS?
Founded in 2005, PlayAGS, Inc. designs and supplies gaming products and services for the gaming sector both in the US and internationally. Categorized into three main segments: Electronic Gaming Machines (EGM), Table Products, and Interactive Games, the EGM subdivision offers various no deposit slot titles – including the no deposit variety and ones with free spins offers – all with sharp graphics and fantastic gameplay.
The company specializes in slot games, slot cabinets, tables, interactive titles, and eBingo, and has the software to comply with legislated gaming industries in Denmark, Gibraltar, Quebec, Malta, Michigan, New Jersey, Ontario, Pennsylvania, Romania, Sweden and UK. While still considered a smaller gaming company, they certainly have a global footprint.
Who is Inspired Entertainment?
Inspired Entertainment is a jack-of-all-trades in regulated gaming. They are a supplier of gaming systems and content for physical machines and virtual systems to over 35 different countries – that includes hardware, gaming software, and high-end graphics. Their product line and expertise includes slots, sports, lotteries, and other betting services. Previously known as Hydra Industries Acquisition Corporation, which was formed solely for the purposes of merging or acquiring another business, and helmed by Lorne Weil, a stalwart of the gaming industry. The company went public in 2014, and acquired Inspired Gaming Group in 2016 for $264 million.
How did the bid come about?
The bid comes off the back of a hard season for PlayAGS, with its valuation taking a sharp hit due to Covid 19 and the associated shutdown of the physical gambling sector. Now, with inflation and the cost of living on the rise, is the time for companies with some money behind them to make moves and snap up strategic companies at a discount price.
The bid itself
The offering on the table to PlayAGS was priced at $370 million, or roughly 30% higher than their trading price, equaling around $10 a share. However, PlayAGS, which, at the time of writing, was valued at $7.84 a share, was priced at $32.04 back in August 2018. Even pre-pandemic, they were trading at over $10.
Has the bid been confirmed?
Over at PlayAGS, “a” bid has been confirmed, that the company had received a proposal but had not yet accepted it. Rather, they were continuing negotiations. While there are rumors swirling around the internet that the bid has been rejected, this has not been confirmed by a reputable source.
The effect of the bid on the companies
Once the bid was confirmed by PlayAGS, it had an immediate effect on their share price, with shares up 7.78% to $8.10 a pop in the wake of the news. The effect on Inspired’s side, however, was negligible, as is to be expected.
The iGaming market
Presently, the iGaming market is in a bit of a downturn, as people worldwide tighten their belts and cut down on spending that isn’t on essentials. The bear market, combined with rising inflation and cost of living is seeing spending on entertainment way down – and thus gaming companies are in a bit of a slump at the moment.
But this isn’t to say that it will last – the economic outlook for the sector is bright. This is due to advances in technology boosting iGaming’s capabilities, and new regulated markets coming online, particularly in the United States.
Will PlayAGS Accept?
It’s difficult to ascertain whether PlayAGS will accept the acquisition bid, though we may be so included to speculate. While they are nowhere near the top of the market share price, many would say that at the moment, they are undervalued and that Inspired’s 30% extra on top is not enough to really make a difference. That being said, their fortunes pre-covid weren’t exactly gangbusters.
It’s a difficult decision to make and one that interested parties will be waiting will bated breath to see the outcome. Whatever the case, we can be assured that Inspired will continue to make moves like this with strategic gaming and technology acquisitions.
