AGS/Inspired Deal Might Not Happen or it Could Reach $13 a Share, Says Analyst

It’s possible that Inspired Entertainment’s (NASDAQ:INSE) pursuance of AGS (NYSE:AGS) doesn’t oddment inward a consummated deal, but it’s also plausible the suitor boosts its bid for the one-armed bandit simple machine maker.

That’s the sentiment of Stifel analyst Jeffrey Stantial who, in a remark to clients today, explores both scenarios. Though Inspired hasn’t officially confirmed it’s courting AGS, word to that burden stony-broke last-place hebdomad with the place later revealing it received and rejected a $10 a portion out all hard currency takeover proposal.

Stantial says a change of factors could make believe it hard for Inspired to seal this deal, though AGS confirmed it is holding talks with the prospective buyer.

Overall, we sentience investors are skeptical a sell will live reached, precondition INSE’s debt capacity, financing risks, still forthcoming ROI for AGS’s operational improvements, and a story of trading o'er $18/share,” wrote the Stifel analyst.

While the power point virtually trading to a higher place $18 is relevant, the 52-week richly on AGS inventory is $10.45 and it hasn’t closed in(p) to a higher place inwards ternary years.

Apollo Considerations, Offer Could Be Boosted

As Stantial points out, much of the success of Inspired’s approach for AGS could furuncle downwards to what damage Phoebus Global Management (NYSE:APO) is willing to accept.

As of the destruction of the secondment quarter, the private equity heavyweight owned 8.2 1000000 shares of the gaming equipment maker, or 22.08% of its shares outstanding. That’s to a greater extent than stunt man the amount controlled past the second-largest institutional investor, indicating Phoebus could experience considerable sway when it comes to AGS existence acquired or remaining independent. The private equity fellowship also controls ii AGS get on seats.

“While we concur the betting odds come along to follow stacked against a potential deal, in the end we follow plump for to Apollo’s likely work inward the decision highlighting the relative maturity (~9 years) of the investment,” adds Stantial. “Assuming INSE/AGS amount to an agreement, we could regard the last purchase terms gallery closer to ~$13/share given ease manageable PF leverage, and getting even thresholds for Florida key AGS shareholders.”

An offering of $13 a portion out hasn’t been publicly revealed and it would follow nearly duplicate AGS’s closure price on Aug. 11 — the 24-hour interval prior to the acquisition news initially being reported.

Assessing Inspired’s Motivations

Inspired’s attractiveness to AGS is understandable. The wooer doesn’t have got a great deal upside line of products exposure to the US and the expansion slot upgrade round could be lengthy, potentially providing keep for the AGS thesis. Additionally, many AGS customers are regional and tribal casinos with loyal customer bases that may follow unfazed by a recession.

Additionally, analysts note the spousal relationship would follow accretive to Inspired’s earnings per share and encouragement its loose cash flow. Still, there are moving parts regarding bringing an AGS/Inspired wedlock to the altar.

“Coupled with a shareholder bag that likewise believes inward the long-term story and valuation dislocation, and we wait management’s preference is to consider the ongoing turn-around efforts out to fruition,” concludes Stantial. “However, we ut take down the INSE CEO view remains unfilled next the founder’s departure inwards 2018, with responsibilities split among the Chairman, COO, CFO, and CSO. This could intimate optionality around AGS direction connection the pro-forma company.”