Firecracker Tussle: Novomatic's Bid for Ainsworth Triggers Integrity Showdown
Industry Upheaval: Debate Rages over Novomatic's Bid for Absolute Domination of Ainsworth gaming empire
Recently, Austrian gaming titan Novomatic announced a binding agreement to seal the deal on buying the leftover 47.1% stake in Ainsworth Game Technology it doesn't already own. With a AUD 1.00 (€0.56) per share offer, the deal values Ainsworth at an approximate equity value of AUD 336.8 million. Although this offer appears generous on paper, it's created a fiery resistance among certain shareholders who claim the deal undervalues the Aussie slot machine manufacturer.
Novomatic's move has received backing from Ainsworth's Independent Board Committee (IBC), with Chair Daniel Gladstone publicly advocating:
The IBC has meticulously assessed the proposed price. We unanimously concluded it offers attractive and definite value for minority shareholders.
Such endorsement suggests that the company envisions significant strategic value in sustainable integration with Novomatic, as the latter has been Ainsworth's largest shareholder since acquiring its majority stake in the past.
However, this anticipated simplicities has transformed into a battleground, sparking division among shareholders over the company's true worth and potential.
Ainsworth's Mixed Performance Fuels Valuation Debate
Ainsworth's recent financial statistics have become a focal point in the valuation dispute. The company reported a 7% drop in revenue to AU$264.1 million (US$167 million) in fiscal 2024, while underlying EBITDA plummeted by 18% to AU$48.2 million (US$31 million), and underlying profit after tax declined by 17% to AU$21.8 million (US$14 million).
These disappointing numbers initially seem to corroborate Novomatic's valuation. However, Ainsworth's North American operations revealed a positive outlook with a 5% increase in revenue to AU$147 million (US$93 million). This trend indicates that the company may possess untapped growth potential that overshadows its overall performance.
In the Asia-Pacific region, Ainsworth faced a 12.5% revenue drop, with segment profits falling to AU$2.7 million, compared to AU$3.4 million the previous year. Despite a slight uptick in unit sales, the average selling price decreased due to inventory discounts ahead of launching the new A-Star Raptor cabinet in February 2025.
CEO Harald Neumann remained positive, saying:
I am content with our progress so far. We continue to capitalize on opportunities, shaping Ainsworth as a leading provider within the gaming industry sector.
Kanen Wealth Management Stakes Ground, Kicks Up Dust
The harshest opposition to Novomatic's offer arises from American investment firm Kanen Wealth Management, owner of 2.5% of Ainsworth shares. On April 28, 2025, Kanen fired off a blistering letter to Ainsworth's board, lambasting Novomatic's proposed acquisition offer as "substantially undervaluing" the company.
David Kanen, president of Kanen Wealth Management, fiercely challenged the valuation benchmarks being used, asserting: "The headline ~7x EV/FY24A EBITDA multiple, driving the offer, is fundamentally misleading." Kanen preaches that this valuation relies on depressed earnings figures that don’t genuinely reflect Ainsworth's true potential.
Beyond mere criticism, Kanen insists on a fair valuation of AUD 1.75 per share, representing a 75% surge over Novomatic's offer. This evaluation is grounded in numerous factors, like Ainsworth's FY24 underlying earnings, the recent resolution of long-standing legal disputes in Mexico, and Kanen's vision for exceptional market potential in North America.
Perhaps the most compelling argument is Kanen's insistence that the bid fails to consider the tremendous value offered by Ainsworth's valuable real estate assets, such as the 291,000 square foot North American headquarters in Las Vegas and its Australian headquarters in Sydney. This contention implies the proposal significantly undervalues Ainsworth’s assets before even considering its intellectual property and market position.
Mexico’s Volatile Ground
Ainsworth's resolution of disputes with Mexican tax authorities represents a major positive development that Kanen asserts is inadequately reflected in the offer. Ainsworth's 2024 Annual Report notes that they have resolved all past issues with the Mexican authorities.
As past reporting reveals, we have settled all disputes with the Mexican authorities.
This settlement comes at a critical juncture for the Mexican gaming market, grappling with significant regulatory turmoil. In November 2023, Mexican President Andrés Manuel López Obrador unleashed a controversial decree, banning slot machines in casinos and other gambling facilities. This decision prompted multiple casino operators to file legal appeals against the ban.
Several crown-wearing judges have already momentarily suspended the order for specific companies, allowing them to proceed business-as-usual until the constitutionality of the decree is determined. The legal procedure could potentially run its course up to Mexico's Supreme Court of Justice, which endorsed the use of slot machines in casinos in its 2016 ruling.
With Ainsworth resolving their specific disputes with Mexican authorities, the company seems better equipped to pilot the choppy seas of this tumultuous gaming landscape, potentially unlocking considerable value unreflected in Novomatic's bid.
The Shifting Slot Machine Landscape
Understanding the bigger gaming context shines a light on both Novomatic's interest in full ownership control and Kanen's resistance to the current offer. The global slot machines market swelled to reach USD 9.70 billion in 2024 and is expected to grow to USD 10.16 billion in 2025, climbing at a CAGR of 4.84%, trending towards USD 12.89 billion by 2030. With established manufacturers with global distribution networks becoming invaluable, Wang Hao, expert financial analyst, notes:
Industry titans owning cross-border powerhouses such as Novomatic are preparing for future dominance in key growth markets, particularly Asia-Pacific and North America.
The industry landscape has fundamentally changed in the last decade, transforming from clunky mechanical cabinets into immersive video and multiplayer experiences. Gamers have embraced cloud-based platforms, mobile-first designs, and social integration, thus accelerating the shift from land-based machines to online and mixed models.
The United States' thriving commercial gambling industry generated record-breaking revenues of $71.92 billion in 2024, representing a 7.5% increase over the past year. Slot machines and table games—traditional casino gaming—reaped combined earnings of $49.78 billion in 2024, marking a modest 0.82% rise. Online gambling accounted for 30% of the total US commercial gaming revenue.
A fascinating development, according to industry analysts, is the surge in revenue from online gaming and cryptocurrency slots.
Novomatic Plots a Path to Asia-Pacific Dominance
For Novomatic, this acquisition checks all the strategic boxes, specifically in the Asia-Pacific and North American markets. Over the years, Novomatic has steadily expanded its global presence through strategic initiatives such as:
- 2023 - Novomatic Americas Headquarters relocation to a state-of-the-art facility in Buffalo Grove, IL, focusing on R&D and improved distribution capabilities.
- 2023 - Expanding distributor contract with APEX PRO Gaming covering North America.
- 2019 - Novomatic inked a distribution agreement with Indo Pacific Gaming (IPG) to supply gaming solutions in key Asia-Pacific markets.
Novomatic's acquisitive strategy positions the company to maximize gains in regions like Southeast Asia, with the company taking proactive measures to appeal to local markets by generating Asia-themed slot games like "Dragon Hits" and "Asian Dragon Hot."
Assuming full ownership of Ainsworth would significantly boost Novomatic's footprint across the globe, opening up lucrative long-term dividends based on Ainsworth’s technology and market penetration. Novomatic's unwavering ambition to dominate these core markets is evident in the words of CEO Harald Neumann:
We're giving you the yellow brick road. Follow it, and you'll conquer the gaming industry.
- Kanen Wealth Management has proposed an alternative valuation of AUSE 1.75 per share for Ainsworth, arguing that Novomatic's offer undervalues the company and its growth potential in online gambling, particularly in North America.
- Ainsworth's recent financial performance shows a mixed picture, with a decline in revenue and EBITDA on a company-wide level, but a 5% increase in revenue from its North American operations, suggesting untapped growth opportunities in the online gambling market.
- Ainsworth has resolved disputes with Mexican tax authorities, a significant development considering the regulatory turmoil in Mexico's gaming market and the potential for unlocking considerable value overlooked in Novomatic's bid.
