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Organization and Business
3 Months Ended
Mar. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Business
ORGANIZATION AND BUSINESS
Organization
AP Gaming Holdco, Inc. (the “Company,” “AP Gaming,” “we,” “us,” or “our”) is a leading designer and manufacturer of gaming products for the casino floor. The Company’s roots are in Class II gaming machines for the Native American gaming market with an emerging presence in a broad range of commercial markets in the United States. As of March 31, 2015, the Company had approximately 8,630 gaming machines in approximately 260 gaming facilities in 20 U.S. states, with approximately 205 gaming facilities under revenue sharing agreements and approximately 55 facilities under daily fixed fee agreements. The majority of our systems are used by Native American gaming operators in both Class II and Class III environments and the Illinois video gaming terminal, or VGT, market. Our products include electronic gaming machines, server-based systems and back-office systems that are used by casinos and other gaming locations.
In the third quarter 2014, the Company began manufacturing and developing table games products through the acquisitions of Casino War Blackjack, Inc. (“War Blackjack”) and other intellectual property related to table games products. The Company provides table games products, which include live table games and side bets to enhance our casino operators’ table games operations, to our licensed casino operators on a fixed monthly fee. As of March 31, 2015, the Company had approximately 450 table game units under monthly fixed fee arrangements.
The Acquisition
On September 16, 2013, AGS Holdings, LLC (“AGS Holdings”), AGS Capital, LLC (“AGS Capital”) and AP Gaming Acquisition, LLC (“AP Gaming Acquisition”), an indirect wholly owned subsidiary of the Company and an affiliate of Apollo Global Management, LLC (“Apollo”), entered into an Equity Purchase Agreement (as subsequently amended and restated on December 3, 2013, the “Acquisition Agreement”). The Acquisition Agreement provided for the purchase of 100% of the equity of AGS Capital from AGS Holdings, LLC (the “Acquisition”) by AP Gaming Acquisition for an aggregate purchase price of approximately $220.5 million. The Acquisition was consummated on December 20, 2013 (the “Closing Date”).
The Acquisition was financed in part by the Senior Secured Credit Facilities (as defined herein), which are comprised of the $155 million Term Facility and the $25 million Revolving Facility (each, as defined herein). AP Gaming I, LLC, an indirect wholly owned subsidiary of AP Gaming, is the borrower of the Senior Secured Credit Facilities, which are guaranteed by AP Gaming Holdings, LLC (“AP Gaming Holdings”), AP Gaming I, LLC’s direct parent company, and each of AP Gaming I, LLC’s direct and indirect material wholly owned domestic subsidiaries including AGS Capital. Additionally, the Company issued 10,000,000 Class A shares of common stock at $0.01 par value to Apollo Gaming Holdings, L.P. The total cost to acquire all the outstanding shares was $100,000,000. The source of the funds for the acquisition of the Company was provided by committed equity capital contributed by certain equity funds managed by Apollo.
C2 Gaming, LLC acquisition
On May 6, 2014, a wholly owned subsidiary of the Company entered into an agreement to purchase 100% of the equity of C2 Gaming, LLC (“C2 Gaming”) for $23.3 million in cash, subject to terms outlined in the Equity Purchase Agreement dated May 6, 2014 (“C2 Acquisition Agreement”). The acquisition was initially funded by a $10.0 million draw on our Revolving Facility and available cash on hand. The remaining purchase price is expected to be funded with either existing cash or existing availability on the Revolving Facility. C2 Gaming is an innovative manufacturer and developer of slot machines based in Las Vegas, Nevada. The purchase will provide for the distribution of C2 Gaming’s platform and content to an increased number of markets in the United States (see Note 3).
Table Games
On July 1, 2014, a wholly owned subsidiary of the Company entered into an agreement to purchase 100% of the equity of War Blackjack for approximately $1.3 million in cash, subject to terms outlined in the Stock Purchase Agreement, dated July 1, 2014 (“War Blackjack Acquisition Agreement”). The acquisition closed on July 18, 2014 and was funded by available cash on hand. War Blackjack is an innovative manufacturer and developer of table and electronic games based in Las Vegas, Nevada.
Cadillac Jack acquisition
On March 30, 2015, AGS, LLC (“AGS”), a subsidiary of the Company, entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Amaya Inc., a corporation organized under the laws of Quebec (“Seller”), and Cadillac Jack, Inc., a Georgia corporation (“Cadillac Jack”). Pursuant to the terms of the Stock Purchase Agreement, AGS will purchase from Seller, through a series of transactions, all of the issued and outstanding common stock, par value $0.01 per share, of Cadillac Jack (the “Cadillac Jack Acquisition”), for an aggregate consideration comprised of (i) $370.0 million in cash, subject to certain adjustments, and (ii) a promissory note with an initial principal amount of $12.0 million, as it may be adjusted pursuant to the terms of the Stock Purchase Agreement. In addition, in connection with AGS’s signing of the Stock Purchase Agreement, the Company and AP Gaming I, LLC, a subsidiary of the Company, obtained binding commitment letters from third party lenders to provide debt financing in an amount, together with a separate commitment by the Company to provide equity financing, sufficient to permit AGS to consummate the Cadillac Jack Acquisition. The close of the Cadillac Jack Acquisition is anticipated to complete in 2015, subject to required regulatory approvals and customary closing conditions.