Ainsworth Game Technology (AGI) has released the explanatory memorandum regarding the proposed sale by Len Ainsworth of his stake in the company to Austrian gaming giant Novomatic (see Ainsworth: Interim result 2016). Unsurprisingly, PwC, the independent experts, believe the advantages of the transaction outweigh the disadvantages to minority shareholders. Also unsurprisingly, the independent directors have determined that Len's family will be allowed to vote their stake at the EGM on 3 June.
Whilst we agree there are potential benefits to AGI from the transaction, including obtaining access to Novomatic’s extensive game library, its distribution network in Europe (a market in which AGI currently has minimal revenue) and potential cost savings, we still believe Novomatic – and Len Ainsworth – is getting the better of the bargain. With Len's family able to vote their approximate 10% stake in favour, the vote is essentially a foregone conclusion. Nevertheless, we recommend shareholders vote against the transaction. HOLD.
Note: The Intelligent Investor Growth Portfolio and Equity Income Portfolio own shares in Ainsworth Game Technology. You can find out about investing directly in Intelligent Investor and InvestSMART portfolios by clicking here.
Disclosure: The author owns shares in Ainsworth and will be voting against the transaction.