(Reuters) - Slot machine maker Bally Technologies Inc (>> Bally Technologies Inc.) said it will buy casino equipment company SHFL Entertainment Inc (>> SHFL entertainment Inc) for about $1.3 billion (859.8 million pounds) to tap into the thriving casino industry in Asia and Australia.

Bally shares rose 9 percent to a record high as investors bet on the broader reach and offerings that the deal is expected to provide.

While Bally primarily makes slot-machines, SHFL offers automatic card shufflers, chip sorters and electronic table games such as Let It Ride, Three Card Poker, Blackjack Switch, and Casino War.

"From a strategic standpoint, we like the combination of mostly non-competitive business lines that include unique technologies and patents from both companies," Sterne Agee & Leach analyst David Bain wrote in a note.

Bally's offer of $23.25 per share in cash represents a 24 percent premium to SHFL's Monday close.

Several Asian countries, trying to emulate the success of the world's largest gambling destination Macau, are building casino resorts to lure high-spending tourists and attract investment.

Taiwan plans to allow casinos to set up shop on offshore islands and the Philippines is developing four large casino resorts. South Korea is also implementing plans to develop casino resorts.

Australia contributed 36 percent to SHFL's total sales in 2012, while Asia contributed 11 percent. Combined, their share was higher than the U.S. contribution of 44 percent.

In contrast, Bally gets 81 percent of its total revenue from the United States.

"Australia is a large market for gaming equipment and Bally has almost no exposure to it," BMO Capital Markets analyst Edward Williams said.

With the deal, Bally's international sales would grow to 24 percent from 16 percent.

SHFL shares rose 21 percent to $22.76 on the Nasdaq, and touched $22.84, their highest in more than six years.

Bally shares rose 9 percent to $66.13. The broader Dow Jones Gambling Index <.DJUSCA> was up 0.74 percent at 697.77 points.

SECOND DEAL THIS YEAR

The deal marks the latest in an industry scrambling to serve a growing appetite for gambling among wealthy individuals in Asia.

Scientific Games Corp (>> Scientific Games Corp), which makes tickets and software for lotteries, acquired slot machine maker WMS Industries Inc (>> WMS Industries Inc.) for about $1.42 billion earlier this year.

Macau, the world's largest casino market and the only place in China where visitors are legally able to gamble, generated $38 billion in annual gambling revenue in 2012, up 13.5 percent from a year earlier.

Tuesday's deal is the biggest for Bally Technologies since its $200 million acquisition of Bally Gaming International Inc in 1996.

Bally, which was founded as a pinball manufacturer in Depression-era Chicago, said the deal is expected to start adding to its earnings per share and free cash flow within a year of closing.

The acquisition, which includes the assumption of $8 million of debt, is expected to close by the second quarter of 2014, Bally said.

The Las Vegas-based company, which made its first slot machine in 1936, said it has obtained committed financing from banks including Wells Fargo (>> Wells Fargo & Co) and JP Morgan Chase Bank .

Bally also forecast earnings of between $3.70 and $4.05 per share, excluding acquisition costs, for the year ending June 2014. Analysts on average were looking for $3.86 per share, according to Thomson Reuters I/B/E/S.

SHFL, previously known as Shuffle Master, was founded by former truck driver John Breeding in 1983 when he decided to make a machine that would shuffle cards. The company went public in 1992.

SHFL, whose CEO Gavin Isaacs has served as Bally Technologies' chief operating officer for five years, had revenue of $259 million in 2012.

Eagle Asset Management is the top shareholder in SHFL with an 8.58 percent stake, according to Thomson Reuters data. BlackRock Institutional Trust Co and Vanguard Group Inc are its other top institutional shareholders.

Goldman Sachs & Co and Groton Partners served as Bally's financial advisers while Gibson, Dunn & Crutcher LLP served as the legal adviser. SHFL's financial adviser was Macquarie Capital while Skadden, Arps, Slate, Meagher & Flom LLP provided legal advice.

(Reporting by Siddharth Cavale and Chris Peters in Bangalore; Editing by Sreejiraj Eluvangal)

By Siddharth Cavale and Chris Peters