By Mike Boyer
The Cincinnati Enquirer

Interlott Technologies Inc., the nation's leading supplier of instant-lottery-ticket vending machines, has agreed to be acquired by Gtech Holdings Corp. for $85 million, including debt.

Gtech, of West Greenwich, R.I., is the largest supplier of online gaming systems and services, with $1 billion in revenues and 4,300 employees.

Mason-based Interlott traces it roots to a patented dispenser that didn't tear tickets, developed by engineer Edmund Turek in 1987. It had record revenues last year of $52 million and earnings of $3.1 million, or 46 cents a share. It employs 230 including about 125 at its Mason headquarters and plant.

Shares in Interlott closed at $8.80, up 95 cents or 12 percent. Volume, which had averaged 3,300 this month, rose to 359,000 shares Monday.

Interlott, which acquired On-Point Technologies Inc., its main competitor, in 2001, has a string of 32 consecutive profitable quarters and last year was named one of the top small companies in the United States by Fortune magazine.

Gtech, started in the late 1970s by a mathematician and a former computer analyst, is part of a consortium that acquired Turfway Park from Jerry Carroll for $37 million in 1999.

Gtech said it would pay $9 in cash or stock or a combination of both for all of Interlott's 6.5 million shares and options. In addition, it will assume Interlott's $21 million in debt.

The purchase price represents a 15 percent premium over Interlott's Friday close of $7.85 a share. Gtech closed Monday up $1.56 at $32.19.

David F. Nichols, Interlott president and CEO, said the synergies gained by combining both companies made the merger attractive.

He said the closely held company has been approached before about being acquired.

"You go along so long and finally, it makes sense,'' he said. "We're excited about the potential.''

Under the agreement, expected to be completed by the end of July, Interlott will become a wholly owned subsidiary of Gtech and retain the Interlott name. The deal is subject to regulatory approvals and a vote by Interlott shareholders.

W. Bruce Turner, Gtech's president and CEO, said the acquisition would expand his company's presence in the instant-ticket segment of the lottery industry and expand Interlott's international business and online capabilities.

Turner said Interlott's instant-ticket machines average $1,400 a week in sales compared with an average of $2,006 a week for Gtech's online machines.

He said Gtech expects to increase the average revenue from Interlott's machines to $1,500 a unit over time.

Interlott has supplied more than 30,000 of its instant-ticket machines to 28 of the 39 states with instant-ticket games and 14 international lotteries.

Turner said Gtech expects to sell another 20,000 of Interlott's machines within five years both in the United States and overseas.

Nichols said the growth potential of the combined companies could mean more jobs at the Mason plant down the road.

Turner said Interlott's machines, ranging from countertop to free-standing units, would allow Gtech to further capitalize on the increasing trend toward retail self-service from gasoline stations to grocery check-out lanes.

He said Gtech is already participating in a program with Circle K convenience stores in California offering free-standing kiosks where customers can pay utility bills, buy phone cards and play the lottery.

Turner said Gtech sees immediate cost savings of $5 million to $7 million from the acquisition, mainly from centralizing purchasing for the combined companies.

Assuming a July completion of the acquisition, he said Interlott would add $33 million in sales and 3 to 4 cents a share to Gtech's earnings this year. Next year, he said Interlott would add $40 million in revenues and 5 to 6 cents a share to its earnings.

Last month Gtech announced plans to acquire a controlling stake in PolCard SA, a Polish debit and credit card services company for $60 million.

Gtech, part of a partnership that includes two Polish equity funds, said it plans to expand PolCard's capabilities to offer new services such as utility bill payments and pre-paid wireless phone cards.

Interlott, which made its initial public stock offering in 1994, introduced phone-card dispensing machines in 1995.

After an April 1999 tornado destroyed two of its buildings in Blue Ash, the company moved its offices and manufacturing to a new 52,000-square-foot plant in Mason.

E-mail mboyer@enquirer.com