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Pollard Banknote Ltd
Symbol C : PBL
Shares Issued 25,613,158
Close 2018-09-25 C$ 21.87
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Pollard to acquire Schafer Systems for $23.5M (U.S.)

2018-09-25 16:41 ET - News Release

Mr. Doug Pollard reports


Pollard Banknote Ltd. has signed a definitive agreement, subject to closing conditions, to purchase substantially all of the operating assets and business of Schafer Systems Inc., the leading global provider of lottery ticket dispensers and play stations.

Schafer was founded in 1986 in Adair, Iowa, and has built its business largely on creating innovative products, including lottery ticket dispensers and point-of-purchase displays for the lottery industry. As the foremost supplier of lottery ticket dispensers, Schafer has partnered with all 44 existing U.S. lotteries and over 50 lotteries in other countries during its three decades in business. Based in western Iowa, Schafer employs approximately 50 full-time employees and is the recognized leader in assisting lotteries to efficiently and effectively distribute their instant-win scratch tickets to consumers.

With a focus on solutions to increase sales at the retail location for the lottery industry and on the development of innovative and proprietary products, Schafer is a leader and key partner to the lotteries for on-counter and wall-mounted modular dispensers with promoters, in-counter dispensers, ticket menu boards, cheque writers, literature holders, promotional products, mounting fixtures, pop-ups, stands, play stations and game centres in a variety of sizes, configurations and materials.

"We are extremely excited about bringing the Schafer team into the Pollard organization and believe it will be a strategically important new product for us to help lotteries maximize their retail sales and generate greater proceeds for their good causes," said Doug Pollard, co-chief executive officer of Pollard Banknote. "The addition of the world's leading lottery retail dispensing experts is another key component in Pollard's strategic focus on being the partner of choice for the lottery industry. We welcome our new team members from Schafer and are confident their three decades of setting the standard with innovative leadership and award-winning products will continue to drive retail lottery excellence. This acquisition ticks all of the important boxes for us, both strategically and financially."

"Schafer's business will be extremely complementary to our existing portfolio of lottery products such as loyalty solutions, sales force management and warehousing and distribution services currently offered by Pollard in addition to our core instant-win scratch ticket operations. Continued innovation will be critical in expanding and growing lottery revenue through the use of efficient, eye-catching consumer- and retailer-friendly dispensing solutions, and the Schafer team will now be supported by the Pollard group of companies and resources to fuel their growth."

The management team of Schafer will be continuing in their roles after the transaction and will work closely with the company's lottery-focused team in Pollard to ensure a smooth transition and integration to continue supporting the lottery industry.

The total acquisition purchase price is $23.5-million (U.S.) (approximately $30.6-million using an exchange rate of $1.30 per $1 (U.S.)) plus standard working capital adjustments, with 100-per-cent all-cash consideration being financed from existing Pollard Banknote cash resources and availability under the company's existing senior credit facility. Schafer has a long history of profitability and the acquisition is expected to be accretive to Pollard Banknote's net income. Closing conditions include standard consents and approvals consistent with a transaction of this size and nature. In addition, the business was formerly operated in Schafer Systems Inc., which was structured as a subsidiary of Owner Revolution Inc. (ORI), which is wholly owned by an employee stock ownership plan (ESOP). As a result, the acquisition will be subject to an approval vote of the active and former employees who remain members of the ESOP and the ESOP trustee. Pollard expects all conditions of closing to be completed early in the fourth quarter of 2018.

Don Hudak, ORI's chief executive officer and president, commented on the pending transaction, saying: "The sale of Schafer to Pollard Banknote brings together two organizations that have successfully served the lottery and gaming industries for many years. Working together, they will represent a real powerhouse in the markets and will be able to bring innovative products and solutions to customers at an even higher level."

John Pollard, co-chief executive officer of Pollard Banknote, concluded: "We are thrilled with the opportunity to join together with the Schafer team and are confident that, with the closing of this transaction, Pollard will add another industry-leading solution dedicated to helping our lottery customers succeed. Assisting lotteries in maximizing their retail sales will also benefit our core instant-win scratch ticket sales, highlighting the strategic and financial benefits of bringing together a variety of lottery solutions in one organization. Pollard Banknote's commitment to grow our organization both organically and through acquisitions will continue, and we look forward to continued success with Schafer."

About Pollard Banknote Ltd.

Pollard Banknote is a leading lottery partner to more than 60 lotteries around the world, providing high-quality instant ticket products, licensed games, and a full suite of digital offerings ranging from game apps to comprehensive player engagement and i-lottery solutions, including strategic marketing and management services.

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