Apollo to make 2.8x its money with PlayAGS IPO

PlayAGS is the latest company backed by Apollo Global Management to go public. With the IPO, the buyout shop founded by Leon Black stands to nearly triple its money.

PlayAGS raised $164 million Jan. 25, when it sold 10.25 million shares at $16 each, the bottom of its $16 to $18 IPO range. PlayAGS made its debut Friday on the NYSE under the ticker AGS. The shares surged 16 percent, or $2.50, to close at $18.50.

Earlier this month, ADT Corp, a security company also owned by Apollo, launched its IPO. The company priced its offering at $14 a share. ADT’s stock traded Friday at $11.76, below its IPO price, making it a busted deal. Apollo was expected to make 2.8x its money with ADT, Buyouts has reported.

PlayAGS, Las Vegas, provides electronic slot machines used in Native American casinos. David Lopez, the former head of Global Cash Access, is president and CEO of PlayAGS.

The company reported $13.6 million in income from operations for 2017’s first nine months, compared with a $15.7 million operating loss in the year-earlier period, regulatory filings said. Revenue rose 24 percent to $154.3 million.

PlayAGS had $573 million in long-term debt as of Sept. 30.

Apollo’s investment in PlayAGS dates to 2013 when it acquired American Gaming Systems for $215 million. Apollo invested $100 million equity as part of the deal, Moody’s said at the time. The buyout shop used its eighth flagship to invest. Apollo Investment Fund VIII LP closed in December 2013 with $18.4 billion of commitments, PitchBook said.

Since 2013, PlayAGS has been acquisitive, buying Colossal Gaming, RocketPlay, Buster Blackjack, the intellectual property of card shuffler, and about 1,600 class II games from Rocket Gaming.

One of its biggest deals was its acquisition of Cadillac Jack, which provides Class II gaming machines for the North American tribal gaming market, in 2015. The deal was valued at $370 million. Apollo kicked in another $52 million equity to fund the Cadillac buy, Moody’s said.

PlayAGS does not appear to have paid out any dividends. The company plans to use proceeds from the IPO to pay some of its debt.

Like most PE firms, Apollo is not selling shares in the PlayAGS IPO. The buyout shop owns 97 percent of PlayAGS. At $18.50 a share, the firm’s stake of 23.2 million shares is worth roughly $429.3 million. Including paper gains, Apollo stands to make 2.82x its investment.

Apollo has much experience in the casino market. Apollo and TPG took Caesars Entertainment private in 2008. Caesars spent years struggling to manage more than $25 billion in debt, Reuters said. The company’s operating unit filed for Chapter 11 bankruptcy protection in 2015 in an attempt to shed $10 billion in debt. Caesars emerged from bankruptcy in October with $10 billion less in debt, Reuters reported.

Executives for Apollo declined comment. PlayAGS could not be reached for comment.

Action Item: Contact PlayAGS CEO David Lopez at +1 702-722-6700

Leon Black, chairman and CEO of Apollo, takes part in Private Equity: Rebalancing Risk during the 2014 Milken Institute Global Conference in Beverly Hills, California, on April 29, 2014. Photo courtesy Reuters/Kevork Djansezian