The Nevada Gaming Control Board recommended Tuesday that Accel Entertainment, a video-gaming-terminal provider, get a two-year license to operate in the state when it closes a deal top acquire Century Gaming Technologies for $140 million.
The licensing now goes before the Nevada Gaming Commission for consideration on May 19.
Acquiring rival slot-route operator Century Gaming would give Accel Entertainment a foothold in Nevada and Montana, two of the nation’s legacy-distributed gaming markets. The Montana-based Century entered Nevada in 2004 after buying United Coin Machine.
Illinois-based Accel expects the Century deal to close by May 31.
One of the many issues raised at the hearing was the $5 million fine levied against Accel by the Illinois Gaming Control Board because of an agreement it signed with DraftKings. That state’s regulators said it violated a law that forbade incentives to keep Accel machines in video gaming establishments.
“I will tell you that having an outstanding matter against you seeking a $5 million fine on a gaming-related item is very troubling,” said Gaming Board Chairman Brin Gibson. “It’s extraordinarily hard for me to even go forward.”
Board member Philip Katsaros said he didn’t have any concerns with Century, which is very well known to the state. The concerns were with Accel.
Board member Brittnie Watkins said she was troubled with Accel executives about their handling of a sexual-harassment case and other issues, such as due diligence and document retention, and worried about cultural compliance issues within the company. She said she didn’t think executives were fully forthcoming, but wasn’t saying that it was intentional.
“When I look at your history of failure of due diligence, I don’t know that I believe you’re going to be fully compliant,” Gibson said. “We have 425 agents who are highly trained, but we’re not like some jurisdictions where we can place an agent with each licensee. We rely heavily on making sure we don’t let the wrong people in. That’s the reason we’re focused so heavily on your history of compliance.”
Accel private counsel Gregory Gemignani with Dickinson Wright responded that Accel has a compliance plan, continues to improve it, and complies with what is expected in Nevada, which is higher than other states. He noted that the Century staff will remain in place and their culture of compliance will be absorbed into Accel and made part of its operations.
“I’ve known you a long time and will take you at your word, but I don’t want to be in a situation where we’re filing complaints against this applicant,” said Gibson to the attorney in pushing for a limited license. “A limit of two years won’t take you that long to establish a track record and reapply.”
Katsaros mentioned sanctions and fines Accel sustained over the last decade, some of which he called normal and even typical in the Nevada marketplace. Accel said they had a handful of minor violations in the last three to four years and were clean until the DraftKings fine.
“I’m looking at a company with a 10-year history and we don’t necessarily have a history or culture of being sanctioned or fined in the markets that they are in,” Katsaros said. “However, that’s a big matzo ball we’re looking at with a $5 million potential fine.”
Accel was helped in its cause by Century CEO and President Steve Arntzen who spoke at the end of the two-hour session. He said it’s been “a rough hearing to sit through.”
With only three shareholders, Arntzen said the deal wasn’t about price, but about finding a company that didn’t overlap with where they operate, so employees wouldn’t be impacted. They also wanted a well-capitalized company.
“The last thing was to be able to continue to do what we do,” Arntzen said. “We didn’t want a new job. None of us do. I want to be the CEO of United Coin until I retire. In a few days I’ll be 67 and I have a five-year to seven-year window. This allowed me to do that. I didn’t want any part of corporate business. I didn’t want to be part of a public company and neither did my two partners.”
Gibson told Arntzen they’ve dealt with Century for a long time and it has a long history of compliance.
“If I see something that’s different from the culture than we had before, I’m going to say something,” Arntzen said. “I fully intend that to continue. I’ve got a lot of fire in my belly. I’m not ready to go home and watch Netflix. We will do everything we can to continue that culture.”
Accel forecasts it will have 23,000 to 25,000 video gaming terminals by the end of 2022, compared to the 13,639 in 2021.
The combined company would end 2022 with an estimated 3,700 to 3,800 locations, up from 2,584 locations in 2021. Analysts said the deal could spur Illinois-based Accel’s move into other states with slot-route businesses and potential markets where it’s yet to be legalized.
