Global Cash Access Holdings Inc will find out next week if investors are ready to bet on the largest operator of ATMs for casinos in the United States.
Its proposed public offering of 9 million shares of common stock worth up to $471.5 million has been well-received on Wall Street, analysts said. Global Cash Access will be among the first companies to go public next week, ending the post-Labor Day lull.
"The reason people like it is because it's the industry leader, it's established, the operating margin is quite high," said Francis Gaskins, an analyst with IPOdesktop.com, adding that "people have always been favourably disposed toward industry leaders in the gaming industry."
The Las Vegas company, which plans to trade on the New York Stock Exchange under the symbol "GCA", is the largest operator of automated teller machines (ATMs) in US casinos. It also provides related systems such as a transaction process that accepts debit cards at slot machines.
Global Cash Access counts eight of the top 10 US gaming companies among its clients, including Harrah's Entertainment Inc, Caesars Entertainment Inc and Trump Hotels & Casinos.
It expects net proceeds of about $108.5 million from the offering, with shares seen pricing between $12 and $14 each on September 12. The company plans to use most of the money to repay debt.
KATRINA'S IMPACT Analysts said the company's roadshows have been well-received. For a gauge of the investor commitment Global Cash Access is likely to garner, "you don't have to look much further than the IPO of Heartland Payment Systems," said Craig Peckham, an analyst at Jefferies who tracks business services stocks.
Shares of Heartland, which provides bank-card based processing services to merchants, priced at $18 in August, above an estimated $14 to $16 range. They climbed more than 45 percent in the first two days of trade and now top $26.
Global Cash Access' IPO will allow the company's private equity backers, Summit Partners and Tudor Ventures, to cash out of a $316 million equity investment in the company they bought from First Data Corp in May 2004.
To be sure, Global Cash Access also faces a range of industry challenges, including competition from rivals such as Certegy Inc, soon to be controlled by Fidelity National Financial Inc, and Cash Systems Inc. It must also must contend with pricing pressure and the impact of Hurricane Katrina on the gambling industry.
But casinos are still an attractive area for cash access products, analysts said, as gamblers have a higher propensity to pay surcharges and establishments are eager to help customers improve access to their cash.
It remains to be seen whether Global Cash Access can restore the IPO market's pre-Labor Day luster.
With nine IPOs on deck for next week, September is shaping up to be nearly as busy as the first few weeks of August when investors snapped up 26 deals worth $4.9 billion.
Analysts said the market is ready for more IPOs and the third quarter promises to be a strong one.
"The equity market in general should be fairly stable going into quarter end and that will help the IPO environment," said Cantor Fitzgerald IPO analyst Sal Morreale.
Among the deals slated for next week are drug companies Intarcia Therapeutics Inc and Sunesis Pharmaceuticals Inc.
Williams Scotsman International Inc, which makes mobile office units and classrooms, has received increased attention recently as damages from Katrina could boost demand for its products along the US Gulf Coast, analysts said.
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