April 5, 2004 – Leeward Islands Lottery Holding Co., the parent company of St. Croix-based Caribbean Lottery Services, has entered into an agreement for all of its shares, which are privately held, to be acquired by GTech Holdings Corp., a Rhode Island company traded publicly on the New York Stock Exchange.
According to a release from GTech, the purchase price is about $40 million. "The acquisition, which is contingent upon regulatory and gaming license approvals and certain closing conditions," is expected to be completed by mid-May, the release stated.
The deal means a gain of eight new long-term lottery contracts that will allow the company to expand its presence in the Caribbean, GTech said.
GTech, a global information technology company with $1 billion in revenues employing 5,000 people in 44 countries, "provides software, networks and professional services that power high-performance, transaction processing solutions," its release stated. "The company's core market is the lottery industry, with a growing presence in financial services transaction processing."
The Reuters news service described GTech Holdings as "the world's largest lottery systems operator."
LILHCo is an exempt St. Kitts and Nevis corporation with operations based in Antigua and St. Croix. Its Caribbean Lottery Services subsidiary offers a regional Lotto jackpot game that can reach millions of dollars; a variety of online validated Instant Scratch Ticket games; the popular fast-draw Caribbean Keno; daily Pairs, Pick 3 and Pick 4 games; the daily Hot 5 game in the Virgin Islands and eight other Caribbean locales; plus Powerball and Power Play games in the territory.
Leeward Islands' principal partners are Robert B. Washington Jr., its founder and chair as well as CEO; Robert L. Johnson, Black Entertainment Television founder, chair and CEO; and celebrity lawyer Johnnie L. Cochran Jr. All are directors of the company and "are expected to continue to serve on the LILHCo board," the GTech release stated.
Leeward Islands holds long-term licenses to operate lotteries in Antigua and Barbuda, Anguilla, St. Kitts and Nevis, Sint Maarten/Saba/St. Eustatius and the Turks and Caicos Islands. It also operates lotteries in Barbados, Bermuda and the U.S. Virgin Islands. Under the purchase agreement GTech would acquire all of these operations.
GTech currently operates lotteries in Barbados, Jamaica, Puerto Rico and Trinidad and Tobago. It is in the process of developing "a complete video lottery solution" for The National Lotteries Control Board and The Betting Levy Board in Trinidad and Tobago, according to the GTech release.
Leeward recently obtained a 10-year VLT license in the Turks and Caicos Islands and a confirmation that its existing license in St. Kitts and Nevis allows for the installation of video lottery gaming.
The V.I. government entered into a contract with Caribbean Lottery Services in January 2002 to supply new regional lottery games in the territory. The 10-year contract called for the company to turn over 10 percent of its gross receipts annually to the V.I. Lottery. In November of that year, CLS began offering the stateside Powerball game.
"Our key focus remains on growing our core lottery business while creating sustainable long-term shareholder value," GTech's president and chief executive officer, W. Bruce Turner, stated. "We believe the acquisition of LILHCo gives GTech a strategic foothold in the Caribbean lottery market, particularly with its regional Caribbean Lotto game, and also represents significant growth opportunities in additional jurisdictions within the Caribbean islands."
Washington said the acquisition "will enable GTech to provide improved technology, efficiency, and flexibility for LILHCo's existing lottery customers, as well as potential new customers."
Upon completion of the closing, GTech expects to replace the lotteries' current systems and equipment with a consolidated lottery system that will be operated from its national data center in Austin, Tex.
Last November, GTech purchased Spielo Manufacturing, a company that makes video lottery terminals. Turner said that acquisition "further enhances the value of LILHCo, given the potential of the growing video lottery business in the Caribbean community." He said GTech plans "to pursue VLT opportunities, where viable, at branded entertainment venues in the Caribbean through joint venture arrangements."
Washington announced last December that Leeward Islands and BET were jointly planning to bring BET's SoundStage nightclub concept to the Caribbean with a regional twist: Each facility would have a separate room for video lottery gaming. (See "Caribbean plan: BET clubs with VLT games rooms".)
Under an exclusive license agreement, he said, LILHCo would design, build and manage new BET SoundStage clubs, restaurants "and other gaming concepts in select Caribbean countries" as a means to developing its lottery and gambling business in the region, a release issued at the time stated. "The key to this opportunity," Washington said then, "is to give the tourists a well-known venue and the ability to have a great meal and drinks, listen to music and try your luck at winning in a first-class venue."
Established in 1994, Leeward Islands and its subsidiaries currently employ 139 people throughout the Caribbean community, the GTech release stated.
Assuming the mid-May closing date, "GTech expects that LILHCo will provide a gross revenue contribution of $20 million to $25 million, representing gross lottery ticket sales, and a net revenue contribution of $6 million to $8 million, for the fiscal year ending Feb. 26, 2005," the release said. "GTech also expects this transaction to be earnings neutral for this fiscal year."
Among the factors that might undermine its projections, the company said, are the intensity of competition in the lottery industry; the possibility of substantial penalties under and/or termination of the company's contracts; and opposition to the expansion of lotteries and gaming.
Reuters quoted Susquehanna Financial Group analyst Eric Hausler as saying that LILHCo is a good strategic fit with GTech: "The acquisition will not only add revenue from Leeward, but it will grow the entire company and enhance the products they already have … For example, it can now take Spielo's products and use Leeward's contracts to market them in the Caribbean.''
Share your reaction to this news with other Source readers. Please include headline, your name, and the city and state/country or island where you reside.
Publisher's note : Like the St. Thomas Source now? Find out how you can love us twice as much — and show your support for the islands' free and independent news voice … click here.