Summit to continue Montana operations
Pub Date: 10/1/2006
It's a scenario familiar in Montana: a small, local company, maybe in the manufacturing or engineering sector, finds a market niche, is worked with skill and dedication, and enjoys a history of success and steady growth, possibly even expanding into other states and markets.
The home-grown company is producing truly innovative products that can compete anywhere in the world. It has strong balance sheets and profit-and-loss statements. Its products and success begin to be noticed by bigger, more established companies. Our Montana firm then becomes a take-over target.
A big market player swoops in, puts down the money, gathers up the assets and moves them, along with a few jobs, to the buyer's home base, then the old brand is absorbed and fades away.
We can all site historical examples that serve as perfect illustrations for the above scenario.
But, according to Tim Carson, President of Summit Gaming in Billings, that is not what is going to unfold when Summit joins forces with Reno, Nev., based GameTech international, Inc.
"If you liked the last 10 years, you're going to love the next 10," Carson says with characteristic confidence. "Summit Gaming is going to stay right here in Billings designing and building leading edge gaming machines for Montana and the other markets in which we operate."
GameTech President and Chief Executive Officer Jay Meilstrip echos Carson's remarks. "Summit is a very attractive company. We like its history, It's people, its location. we've invested a lot of money and have no intentions of making changes to Summit. It's not broken so we don't plan on fixing it."
When the example of VLC, the Montana company bought out and absorbed by IGT, is cited, Meilstrip is quick to point out the decisive difference. "When IGT bought VLC, they were buying market share. See, We're not in video lottery at all. Summit is an incremental addition a wonderful addition to our core company." The acquisition provides GameTech an entree into an entirely new market niche for the company.
Meilstrip goes even further: "We may move some of our manufacturing and engineering resources to Billings. The costs there compare very favorably to Reno.
"We were very aggressive in making sure key Summit people will be staying with the company. We're very happy with everybody."
Beyond that, Carson predicts the alliance will strengthen SummIt's operations, opening new markets where GameTech already operates.
Summit has always focused on the Montana market first, and that means video keno and poker machines. But it also builds conventional slot machines and other games for other markets including South Dakota, West Virginia, Louisiana and Native American casinos.
On the flip side of the Summit/GameTech marriage, GameTech has specialized in developing and marketing portable and fixed-base interactive electronic bingo player terminals and systems nationally, internationally and at Native American venues.
On the face of it, the two companies, while taking different tacks in the gaming market, could see significant synergies with their now expanded menu of equipment offerings and jurisdictions in which they are licensed.
"These two entities are a perfect fit," Carson says, and that applies to more than just the new product mix. "We are of similar size and have a similar approach to business, too. We understand that it is our people who have created these products and have allowed these companies to grow and succeed. To continue along this path, we will need to continue to invest in our people," Carson says.
"We have a lot of the building blocks in place and will begin ramping up our engineering as we move to exploit new opportunities. Both companies have a lot of depth in different areas."
According to Wall Street, GameTech has 50 percent of the world electronic bingo market and, Carson adds, "a lot of experience with hand-held gaming devices, which we see as a new wave about to hit the market. We want to be part of it."
Carson said, "In their markets, they function as both the supplier and operator, a different model than we have here." GameTech leases equipment or shares in operator income.
"You put that together with our proven keno and slot games and you could have something very successful. At this point, We're moving forward, putting top engineers to work as fast as we can find them. We're in a growth pattern."
Carson says the vision that has been the focal point at Summit for more than 10 years remaining "customer driven and product driven" will not change. And neither will the company's location.
"The company is our staff. This is our home. We live here, raise our kids here. Montana has a great labor pool and we have a quality work force that is competitive with any other anywhere."
Gametech CEO Meistrip said he is looking forward to spending more time in Montana and getting to know the people here and at Summit. "From a personal point of view," he said, "the hunting is good there. Being born and raised in Michigan, I've learned to love upland game bird hunting.
"Acquiring Summit is a dream come true. It's going to be a good deal for everyone."
The sale was formally announced the evening of Aug. 30. In a news release issued by GameTech, it was stated, "On August 30, 2006, GameTech international, Inc. entered into an asset purchase agreement with Summit Amusement & Distributing, Ltd. to purchase substantially all of SummIt's assets and assume certain of its liabilities."
Meilstrup commented in the official release, "We at GameTech are very pleased to announce this acquisition. We believe that SummIt's business is highly complementary to GameTech's existing business, and that the acquisition will provide GameTech with the opportunity to significantly expand its product offerings and market presence. We are also very optimistic about the opportunities we believe exist to grow SummIt's business."
Summit reported sales in 2005 of approximately $25 million and pre-tax income in 2005 of approximately $4 million.
"The purchase price is $37 million in cash, subject to adjustment, up or down, based on SummIt's working capital as of the closing date, plus an earn-out of up to $2 million in cash based on profitability goals for 2006," the release said.
GameTech "plans to finance the acquisition with a $10 million revolving line of credit and a $30 million term loan.
"The transaction is subject to a number of customary closing conditions. Under certain circumstances, if the transaction fails to close, (GameTech) would be required to pay Summit a $1 million termination fee, including if the Company is unable to obtain required financing and licenses. The transaction is expected to close in the first fiscal quarter of 2007."
Source: The Montana Tavern Times, Oct., 2006, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701.