IGT Close in on Cyberview

Cyberview Technology (AIM: CYBV) today announced it has entered into a conditional agreement with IGT for the sale of the Company’s business and operations

The AIM listed manufacturer of server-based downloadable gaming systems, stated that the offer from IGT values the company at around £38.8m, equivalent to around 220p per share, to be paid in cash upon completion.

In addition, Cyberview also announced an agreement to grant IGT exclusive licenses to some of its intellectual property for a one time license fee of approximately £4.6m.

The deal represents around a 10% premium over year-long highs made in September 2007, but is a whopping drop from the 700p share price seen when the company listed on AIM in 2005.

The company said it plans to dissolve and wind up the company and distribute its cash assets to shareholders on completion of the sale.

There is doubt, however, as to whether the deal will gain the full support of Cyberview’s shareholders.

One independent London analyst, interviewed by http://www.penny-slot-machines.com, stated “At the moment, only 44% of the shareholders have given Irrevocable Undertakings to accept the offer, but this reduces to just 33% under certain circumstances. This seems very low, when considering how tightly held the company’s shares are with institutions and other major shareholders”, adding “We had expected over 70% uptake at this stage of proceedings”

Attempting to explain the low initial uptake, the London analyst noted that clues could be found in the Cyberview results that were released in parallel with the offer announcement

“Although the headline figures of the Cyberview results showed a loss on ordinary activities of £782,000, this figure includes significant investment in the new US business. This somewhat obscures the fact that the company’s core business has seen exceptionally strong trading, posting a £3.4m profit for the year.”, the analyst said, adding, “Further to this, the company had over £10m in the bank at year end, which when taken into account, values the offer for the operating business at only around £27m. Based on the core business alone, this values the Company on a PE of of under 8 times earnings, which seems too cheap”

However, it appears that even that £3.4m profit figure may be mis-leading to investors with regard to the underlying value of the Cyberview core business, with the analyst commenting, “During the year, Cyberview have won several new contracts, have installed further terminals into Ladbrokes, including another 1,500 machines in Q4 that are now creating extra revenue for the company. In addition, the company have agreed significantly better terms and conditions with Ladbrokes, which we anticipate will generate extra revenue dropping straight through to bottom line profit.”

The analyst went on to add, “In all, when taking into account other positive factors such as the effect of new, longer opening hours at Ladbrokes and new orders for slot machines from the Czech Republic, Cyberview may expect to double that £3.4m profit figure in the near future. This would value the takeover offer at only 4x future earnings of the core business and that would not even factor in the value of the new US business”, adding “Given the strength of the core business, perhaps it is understandable that thus far there has only been a weak response from major shareholders in support of the deal”

The transaction is subject to approval at a General Meeting, where a “Plan of Liquidation” will be put before Shareholders for their approval.

Cyberview shares moved up to 190p in early trading following the announcement

Slot Giant IGT Acquires Cyberview Technology