As has been publically proclaimed and completely explained that MGT's majority-owned subsidiary has filed proceedings claiming infringement against WMS Gaming, a subsidiary of the general public company WMS. MGT alleges that some gaming machines infringe on its "Gaming Device Having a Second Separate Bonusing Event" patent that was issued in February 2011.
MGT names six slot machines in its lawsuit, of which five were manufactured by WMS Gaming.
Pirate Battle -WMS
Reel'em In Compete to Win -WMS
Great and Powerful Oz -WMS
Paradise Fishing -Aruze
This makes WMS the first defendant within the proceeding and, if it loses, the corporate with the most biggest monetary burden. Some estimates the money at stake during this proceeding will go in the billions. Of course, nobody will recognize exactly what proportion cash WMS may be ordered to pay, if something in the slightest degree, however we tend to do recognize that MGT's primary mission is to legitimatize property and so is happy to unrelentingly pursue WMS.
Doubts Corroborated by Goldman Sachs, Sterne, Agee & Leach and CLSA
The plot thickens after going through the curious actions of high tier analysts following the offer by Scientific Games. Before the day of the acquisition offer, Goldman Sachs raised its WMS worth target from $13 to $24 and maintained a "Cautious" coverage sight.
Most different major analysts (Wells Fargo, JPMorgan, Morgan Stanley and BMO Capital) right away raised their worth targets to Scientific Games' full asking price of $26.
Why solely a $24 worth target for Goldman Sachs, and why its cautious view? May it that its analysis factored within the probability of complications (or outright failure) of the buyout? regardless of the reason, Goldman Sachs had succumbed to look at the pressure and raised its worth target to $26.
However, David Bain at Sterne, Agee & Leach wasn't thus simply convinced. Bain maintained his Neutral rating and $17 worth target, noting inevitable "growing pains" and "vastly differing cultures between the 2 corporations."
Analysts at CLSA of Credit Agricole shared this pessimism. In a report they rated WMS a right away Sell and explained,
We couldn't have probably visualised any sort of desirability in WMS to warrant a buying deal, plus one with a fifty nine premium. WMS isn't simply a turnaround story however a whole abode.
Like analysts at Wells Fargo, JPMorgan, Morgan Stanley and BMO Capital, CLSA doubts the other firm besides Scientific Games can bid for WMS.
Scientific Games Could Back Out of the Deal
When a major public company like Scientific Games offers to bid for a company, it's already performed thoroughgoing due diligence and such as explicit conditions that it provides can not be valid. As a result of Scientific Games' offer letter isn't public, with certainty that conditions are such as it might be a surprise, however, if Scientific Games failed to leave "out" for itself within the event of a explosive legal liability arising at WMS. Morgan Stanley noted this risk in its analysis report within the section Potential draw back Catalysts: "SGMS deal to get the corporate is delayed/cancelled."
To date, WMS has not commented on its unfinished causa with MGT, nor has Scientific Games most as acknowledged the causa. This despite the actual fact that MGT alleges that there ar up to 10,000 infringing machines operative nowadays generating wagered revenues of up to $3,000 per machine per day. Lest we tend to forget that WMS manufactures 5 out of the six allegedly infringing machine sorts, we tend to see however WMS' legal liability can be actually monumental.
MGT put allegation along with its entire subsidiary on WMS by providing gaming machine which mechanically assembled in a way that gives separate bonus in its second round. Six machines which MGT mentioned do such type of job of providing extra bonus which might lead to unconventional losses in its second round.
Most analysts are of the opinion that this proceeding case may be end by disclosing amount in billions but if this happens WMS may be brought under pressure to pay the obligation. Here MGT will try by their best to prove the legitimacy of the property and bring under pressure the WMS by paying whatever is lost by second round. The scenario is dubious and need to be further analyzed. Various investment agencies like JPMorgan, Morgan Stanley etc also raised their net worth before the acquisition. Some investors like David Bain maintained their neutral rating and stuck to $17 worth. Why this happened that some are rising while some are at historical level, perhaps the doubt in mind may lead toward such a situation.
Point which must be noted is that when a well performed company is going to acquire which is also in winning path then their might be some grey areas like scientific games offer for WMS both were performing well and here it is clear that grey area was in their analysis which was kept hide. Not knowing the real picture MGT gone for suing rather than offering to anyone of them a wise and clever step. Up till now MGT is claiming for about $10000 breaching machine losses where roughly one could estimate that per machine $3000 per day which is a huge amount. Though MGT is in winning position or at least absolutely free of losses but never WMS came forward with any claim or even disclosure though the other scientific games disclose the issue and acknowledge it. Who will win and who will lose, we will left it on time but statistics are in favor of MGT rather WMS.