State lottery operator put up for sale Bid in Kentucky dropped because of uncertainty

'I am greatly concerned'

State official says purchase could be positive for company

September 28, 1996|By Marina Sarris | Marina Sarris,SUN STAFF

The company that took over Maryland's $1 billion-a-year lottery business last month is up for sale, raising questions about its future here.

Automated Wagering International Inc. yesterday cited uncertainties surrounding its possible sale as a reason for withdrawing its offer to run the Kentucky lottery.

AWI's parent company, Video Lottery Technologies, disclosed that it was "entertaining offers for the purchase of AWI" in a letter to Kentucky Lottery President Arthur L. Gleason Jr.

The announcement raises questions about how the potential sale could affect the company's $53 million contract to run the Maryland lottery for five years.

William W. Saltzman, Maryland's acting lottery director, said he viewed news of a possible sale as a "positive development." He said he believes a new buyer would be bound by the contract signed by AWI.

But one state legislator said he was alarmed.

"I'm greatly concerned for the citizens and taxpayers of the state of Maryland," said Baltimore Del. Clarence Davis, chairman of a House of Delegates lottery subcommittee.

Several AWI officials did not return phone calls seeking comment.

The news comes on the heels of several corporate misfortunes for AWI in 1996.

The Atlanta-based company launched an aggressive expansion last year, winning contracts in Arizona, Maryland and Kentucky.

But AWI's takeover of the Arizona Lottery in November was marred by persistent computer problems. Software glitches created billing problems and paralyzed the entire system for hours at a time on occasion. In May, the Arizona Lottery fired AWI.

The Minnesota Lottery fined the company for late software and decided not to exercise its option to extend AWI's contract without rebidding.

In addition, Video Lottery announced that it was being sued for breach of contract by Electronic Data Systems Corp., which serves as a subcontractor of computer software services to AWI.

In the letter to Kentucky Lottery President Gleason, Video Lottery President Richard M. Haddrill noted that EDS would not be a subcontractor in Kentucky as originally planned.

Haddrill said he had to withdraw AWI's offer in Kentucky because, due to "legal considerations," it could not provide the lottery with the information Kentucky required on EDS' possible replacement and on the potential buyers of AWI.

This month, a Video Lottery director, William Spier, said he may try to acquire AWI, possibly with another member of Video Lottery's board of directors.

Saltzman, the Maryland lottery chief, said he understood why Video Lottery might be reluctant to tell Kentucky who was interested in buying AWI. "It would tip the hands of people who would want to deal," he said.

"I would think that if someone with capital buys into this company, they would be able to feel they would have a free hand to bid on more contracts around the country. That would be a positive development," he said.

"I want to see this company succeed. The industry badly needs the competition," he said.

The only other major provider of lottery computer services in the nation is giant GTECH Corp.

In addition to Maryland, AWI runs lotteries for Delaware, Florida, Minnesota, Montana, Pennsylvania and South Dakota.

AWI's start-up in Maryland last month was far from smooth. Retailers have complained of malfunctioning computers and keno screens that occasionally display the wrong numbers. Because of another computer glitch, Maryland lottery agents provided some wrong winning numbers to customers of The Big Game, a multistate lottery launched last month.

Maryland sales initially dipped, but have rebounded, Saltzman said. AWI "is doing better each day, our revenues are back to pretty much where they should be, and my staff is smiling more," he said.

Pub Date: 9/28/96

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