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The spread on the $5.1 billion acquisition of Bally Technologies Inc. (BYI) by Scientific Games Inc. (SGMS) narrowed but the market remains wary of the deal in a rocky equity market and uncertain performance in the gaming industry.

Scientific Games, which is 39% controlled by Ronald Perelman's MacAndrews & Forbes Holdings Inc., is buying Bally, which provides electronic gambling games and technology, for $83.30 per share in cash.

The deal spread, which widened with declining equity markets last week, narrowed from about $5.60 at the market close Friday to $3.65 Monday, in part with the filing of the definitive proxy for the deal.

Bally shareholders are set to vote on the merger Nov. 18 with a record date of Oct. 20, dates set earlier this month.

The deal is subject to a number of state gaming approvals, the chief of which is Nevada. The Nevada gaming board has its next meeting on Nov. 5 and 6 and the commission meets on Nov. 20. If the deal is not on the agenda for those meetings, the next potential approval date in Nevada would be Dec. 18.

Mississippi approved the transaction at a meeting on Oct. 16. The Maine Gambling Control Board meets Tuesday and is expected to rule on the transaction. The Missouri Gaming Commission will consider the change of control at its Oct. 29 meeting.

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The companies currently expect the transaction to close by the end of the year.

The market is more concerned about the deal financing than the gaming approvals.

With the gaming industry sputtering and the buyer under the effective control of Perelman, the costs of the transaction are considered a risk. Especially in a declining equity market, there are risks that Perelman could seek a price reduction, one risk arbitrageur said.

In early October, Scientific Games revised its credit agreement for a revolver, increased from $350 million to $568 million, and a $2 billion term loan that increases its debt costs by 175 basis points.

The deal is not conditioned on financing. Scientific Games has a $105 million reverse termination fee if it fails to close the deal over with regulatory or funding issues. To gain regulatory approval it must divest business representing up to $85 million of revenues.

The deal does have a debt marketing period of 23 consecutive days following meeting major conditions of the merger agreement. Those consecutive dates cannot include days around the Thanksgiving holiday and must end by Dec. 19, unless it does not begin until next year. Since the companies expect the deal will close by the end of 2014, they might expect Nevada to clear it at the Nov. 20 meeting and for the marketing period, if employed to end by the Dec. 19 cut-off.

If the deal closes at the end of December, the spread Monday represented an annualized return of 23%.