Casino operator Boyd Gaming Corp. said Wednesday it will acquire an Illinois slot machine route operator for $100 million, putting the Las Vegas-based company into the distributed gaming business.
The purchase of Lattner Entertainment Group will give Boyd control of nearly 1,000 video gaming machines in 220 locations across the state.
“The acquisition of Lattner is a strategic opportunity to further diversify and expand our business,” Boyd Gaming CEO Keith Smith said in statement. “Lattner will provide us a valuable new avenue to access gaming customers, and a platform to participate in the expansion of distributed gaming. We … look forward to establishing ourselves as one of the leading distributed gaming operators in the country.”
Slot machine route operators manage games for third party locations, such as bars, taverns, convenience stores, and other businesses. The slot route operators pay a space lease for the games or have a revenue share agreement with the location’s owner.
Boyd expects the transaction to close by the end of June and will finance the transaction through cash flow from operations and availability under its existing credit facility.
In Illinois, Boyd operates the Par-A-Dice Hotel Casino in the central Illinois community of East Peoria and the Blue Chip Casino in neighboring Indiana. Also, Boyd is acquiring the Belterra Casino Resort in Florence, Ind., as part of its $575 million deal to purchase four Pinnacle Entertainment properties in the Midwest. That transaction is expected to close later this year.
Illinois has become one of the nation’s largest distributed gaming states, with 28,403 video gaming devices operating at the end of January,14.2 percent more than a year ago. Penn National Gaming jumped into the Illinois distributed gaming business in 2015 with the acquisition of Prairie State Gaming.
According to the Adams Revenue Revue, VLT revenue grew 15.9 percent in January. Meanwhile, Illinois casino revenue declined 5.6 percent during the month, but overall, Illinois’ total gaming revenue was up 4.2 percent in January.
During a 2016 quarterly earnings call with analysts, Smith complained that Boyd’s Illinois riverboat casino faced competition from thousands of video lottery terminals located in bars and taverns in the area surrounding the property.
“That’s like three new riverboat casinos in the market,” Smith said.
Macquarie Securities gaming Chad Beynon told investors in research note that Boyd paid a higher price for Lattner than rivals Penn National or Golden Entertainment.
“This is Boyd’s first entry into the market and another way to diversify revenues and fend off VGT cannibalization of its Par-a-Dice property,” Beynon said.
