Novomatic Takeover of Casinos Austria Rejected by Government

The Federal Competition Authority blocked Novomatic’s plans to become a major stakeholder in Casinos Austria, saying it was due to “competition concerns”

The global gambling equipment producer, Novomatic AG, had its plan to overtake Casinos Austria blocked by the Austrian authorities last Thursday, on what were said to be “concerns” about competition restrictions.

The “Austrian Solution” was to see Novomatic as a major stakeholder in Casinos Austria AG (CASAG), yet the bid was turned down last week by the Federal Competition Authority (BWB).

Harald Neuman, the CEO of Novomatic stated that the BWB set requirements that would not turn out to be “commercially viable” for the company and that they would hinder the “positive development” of CASAG.

A Thwarted Plan

Casinos Austria AG currently runs 12 casinos in Austria, along its global operation with units in Canada, Australia, Switzerland, Egypt, and a number of EU casinos. Novomatic’s operations, on the other hand, are more focused on the Asian markets, which is why the company took an interest in the Austrian operator.

On July 2015, Novomatic issued a press release on their website stating that the company had submitted binding offers to shareholders in CASAG which were successfully accepted. The offers were submitted to MTB Privatstiftung for its 16.8% shares and Leipnik-Lundenburger IB AG for its 11.34% indirect shares, making Novomatic a 30% holder of CASAG’s shares.

As the press release suggested, by acquiring the stakes the company was given the possibility to “contribute” as a “solid Austrian partner with international expertise”. The company also noted that they are interested in acquiring other shares, if they came at an “acceptable price”.

Their goal was realized in February this year, when the company formed a strategic partnership with Sazka Group from the Czech Republic that was to see their shares of CASAG joined and make the partner companies controlling stake holders. But the deal was subject to approval from Austrian authorities and it was officially rejected last week by the BWB.

Unfair Rejection

According to Novomatic, the merger was rejected due to “lack of consensus” as the BWB set terms which were financially unrealistic. The company noted that even though it tried to compromise in areas that were relevant to the BWB, the Federal authority demanded “structural changes” in the company’s Czech casinos that even implied the sale of a number of venues.

The changes demanded, together with the restrictions that were to be imposed on the Video Lottery Terminals run by CASAG, were to bring serious economic drawbacks to both companies.

As to the official reasons for the rejection, which were said to be “competition” concerns, the company noted that the merger was a “legal monopoly” and not a case of regular competition.

Regarding the rejection, Neumann added that they have struggled until the very end to reach a compromise that would have been realistic for all concerned parties but that they couldn’t agree to the terms proposed. The company didn’t exclude the possibility of an appeal to the BWB decision either.

The rejection was the only negative point this year, as the company had a very successful half-year growth with a 10.8% increase in overall revenue.