Novomatic’s recent move to acquire the remaining shares of Ainsworth Game Technology has sparked significant controversy in the gaming industry, with some shareholders claiming the deal substantially undervalues the Australian slot machine manufacturer. The proposed acquisition, which would give the Austrian gaming giant complete control over Ainsworth, has exposed deep divisions among stakeholders about the company’s true worth and future potential.
Acquisition Offer Triggers Shareholder Resistance
Austrian gaming powerhouse Novomatic recently announced its binding agreement to acquire the remaining 41% stake in Ainsworth Game Technology that it doesn’t already own. The cash offer of AUD 1.00 (€0.56) per share values Ainsworth at an equity value of approximately AUD 336.8 million and represents a 35% premium over Ainsworth’s closing share price of AUD 0.74 on April 24, 2025. While this might seem generous at first glance, the offer has ignited fierce opposition from certain minority shareholders.
The bid has received strong endorsement from Ainsworth’s Independent Board Committee (IBC), with Chairman Daniel Gladstone publicly stating:
The IBC has carefully evaluated the proposed consideration. We unanimously formed the view that the proposal represents attractive and certain value for minority shareholders.
This support suggests Ainsworth’s leadership sees strategic value in the full integration with Novomatic, which has been the company’s largest shareholder since acquiring its majority stake several years ago.
However, what Novomatic likely hoped would be a straightforward process has evolved into a contested battleground. The resistance threatens to complicate the acquisition of the ASX-listed slot machine manufacturer, potentially extending the timeline and adding uncertainty to the deal’s completion.
Ainsworth’s Recent Financial Performance Creates Valuation Debate
Ainsworth’s recent financial results have become a central point in the valuation dispute. The company reported a 7% decline in revenue to AU$264.1 million (US$167 million) in fiscal year 2024, with underlying EBITDA falling by 18% to AU$48.2 million (US$31 million) and underlying profit after tax declining by 17% to AU$21.8 million (US$14 million). These declining figures might appear to support Novomatic’s valuation at first glance.
The financial downturn was primarily attributed to challenges in Latin America, particularly economic difficulties in Argentina and import restrictions in Mexico. However, Ainsworth’s North American operations showed promising growth, with revenues increasing by 5% year-on-year to AU$147 million (US$93 million). This regional success story suggests the company may have stronger growth potential than its overall numbers indicate.
In the Asia-Pacific region, Ainsworth saw revenue decline by 12.5% to AU$42.7 million (US$27 million), with segment profit falling to AU$2.7 million compared to AU$3.4 million the previous year. While regional unit sales of 1,406 were slightly up year-on-year – with Australia representing 1,308 of those units – the average selling price decreased due to inventory discounts ahead of launching the new A-Star Raptor cabinet in February 2025.
CEO Harald Neumann has expressed optimism despite these mixed results, stating:
I am pleased with progress to date as we continue to capitalize on opportunities and establish Ainsworth as a leading provider within the gaming industry sector. The investments we have made have enabled us to upgrade our technology hardware and continue to improve game performance which are expected to ensure our long-term sustained success.
Kanen Wealth Management Leads Opposition
The strongest opposition to Novomatic’s offer comes from Kanen Wealth Management, a US-based investment firm holding approximately 2.5% of Ainsworth shares. On April 28, 2025, Kanen sent a strongly worded letter to Ainsworth’s board, publicly denouncing Novomatic’s proposed acquisition offer as “materially undervaluing” the company.
David Kanen, president of Kanen Wealth Management, directly challenged the valuation metrics being used, stating: “The headline ~7x EV/FY24A EBITDA multiple cited to justify the offer is fundamentally misleading.” Kanen argues that this valuation relies on depressed earnings figures that don’t accurately represent Ainsworth’s true potential.
Going beyond mere criticism, Kanen has asserted that a fair valuation should be closer to AUD 1.75 per share – 75% higher than Novomatic’s current offer. This valuation is based on several factors, including the company’s FY24 underlying earnings, the recent resolution of long-standing legal disputes in Mexico, and what Kanen sees as excellent market potential in North America.
Particularly compelling is Kanen’s assertion that Novomatic’s offer fails to account for nearly AUD 100 million in valuable real estate assets, including Ainsworth’s 291,000 square foot North American headquarters in Las Vegas and its Australian headquarters in Newington, NSW. This argument suggests the bid substantially undervalues Ainsworth’s tangible assets alone, before considering its intellectual property and market position.
The Mexican Market Situation
The resolution of Ainsworth’s disputes with Mexican tax authorities represents a significant positive development that Kanen believes isn’t properly reflected in Novomatic’s offer. According to Ainsworth’s Annual Report for the year ended December 31, 2024, they have resolved all past disputes with the Mexican authorities.
As we have previously reported, we have resolved all disputes with the Mexican [authorities]
This resolution comes at a critical time for the Mexican gaming market, which has been experiencing substantial regulatory turbulence. In November 2023, the government of President Andrés Manuel López Obrador issued a decree banning slot machines in casinos and other gambling facilities. This controversial move prompted numerous operators to take legal action against the ban.
At least twelve permit holders and casino operators filed writs of amparo (a legal claim in Mexico to make constitutional rights effective) in late 2023 to challenge the reform of Mexico’s Federal Law on Games and Sweepstakes. Some judges have already suspended the rule for specific companies, allowing them to operate normally until the constitutionality of the decree is resolved.
The judicial process is expected to last about a year and could reach Mexico’s Supreme Court of Justice, which unanimously endorsed the use of slot machines in casinos in 2016. In that ruling, the court declared that those playing slot machines were taking part in sweepstakes, with outcomes not depending on skill unlike card games, which are defined as gambling under Mexican gaming law.
With Ainsworth having resolved its specific disputes with Mexican authorities, the company appears well-positioned to navigate this challenging regulatory environment better than some competitors, potentially creating significant value not reflected in Novomatic’s offer.
The Broader Slot Machine Market
Understanding the industry context helps illuminate both Novomatic’s interest in full ownership and Kanen’s resistance to the current offer. The global slot machines market reached USD 9.70 billion in 2024 and is expected to grow to USD 10.16 billion in 2025, expanding at a CAGR of 4.84% to reach USD 12.89 billion by 2030. This growth trajectory makes established manufacturers with global distribution networks particularly valuable.
The industry has undergone transformative changes over the past decade. Traditional mechanical cabinets have evolved into immersive video and multiplayer experiences that leverage advanced graphics engines, augmented reality, and real-time analytics to personalize player engagement. Concurrently, cloud-based platforms and mobile-first design have accelerated the transition from land-based terminals to online and hybrid models.
In the United States specifically, the commercial gambling industry achieved record-breaking revenue of $71.92 billion in 2024, marking a 7.5% increase over the previous year. This represents the fourth consecutive year of revenue growth for the industry. Revenue from traditional casino gaming, encompassing slot machines and table games, reached $49.78 billion in 2024, a modest 0.82% increase. Online gambling accounted for 30% of total U.S. commercial gaming revenue, highlighting shifting consumer preferences toward digital platforms.
In addition, there has been a notable increase in revenue from online gaming and crypto slots.
Novomatic’s Strategic Expansion
For Novomatic, the acquisition aligns perfectly with its long-term expansion strategy, particularly in the Asia-Pacific and North American markets. The Austrian gaming giant has been methodically building its global presence for years. In 2023, Novomatic Americas relocated its headquarters from Mount Prospect, Illinois to a specially designed location in Buffalo Grove, Illinois, enabling expanded R&D and distribution capabilities.
The new headquarters features 26-foot ceilings, five truck docks, heavy power, and dedicated laboratory/showroom/technician spaces, demonstrating Novomatic’s serious commitment to the North American market. Around the same time, the company extended its distributor contract with APEX PRO Gaming covering North America and the Caribbean and acquired selected assets of Apogee Gaming, further strengthening its product portfolio in the region.
In Southeast Asia, Novomatic signed a distribution agreement with Indo Pacific Gaming (IPG) in 2019 to supply its full range of gaming solutions across Cambodia, Laos, Sri Lanka, Goa, Nepal, and Vietnam. This partnership was specifically designed to accelerate Novomatic’s expansion in the Asia-Pacific region. The company has been actively developing Asian-themed slot games like “Dragon Hits” and “Asian Dragon Hot” to appeal to regional markets.
Complete ownership of Ainsworth would significantly bolster Novomatic’s capabilities in these strategic regions. Incorporating Ainsworth’s technology and market penetration into Novomatic’s international operations spanning more than 130 countries could bring substantial long-term dividends, explaining why the Austrian company is eager to complete this acquisition.
The Journey Ahead
The consolidation still requires approval from Ainsworth’s minority shareholders in addition to customary regulatory approvals. Stakeholders will likely vote on the proposal in the second half of 2025 after an independent expert report regarding the offer’s fairness is completed. If the deal passes these hurdles, the companies anticipate final court approval by the end of August 2025.
However, the outcome will largely depend on whether Kanen can convince other stakeholders to back its position. The US investor firm’s public challenge adds complexity to a transaction that Novomatic likely hoped would proceed smoothly, potentially forcing a reevaluation of the offer terms.
While Novomatic and Ainsworth’s board contend the suggested price accurately captures the company’s long-term prospects, opponents like Kanen believe the deal is designed to discourage open market competition and suppress shareholder input. With Ainsworth’s improving North American performance, resolution of Mexican disputes, and valuable real estate assets, the argument for a higher valuation has gained traction among some investors.
The coming months will prove critical as both sides marshal their arguments ahead of shareholder votes. For Ainsworth’s minority shareholders, the decision boils down to accepting Novomatic’s guaranteed premium now or holding out for potentially greater value in the future. For the gaming industry as a whole, the outcome will signal how the market values slot machine manufacturers in an increasingly digital gaming landscape.
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