With two months now having passed, it’s clear that the announced merger of IGT with Everi, sans lottery, has not been a smash with investors. The stocks of both companies have lost about a quarter of their value.
That may be surprising on its surface, especially from the perspective of current Everi shareholders, as the much smaller company will own 46 percent of the new entity.
It is also somewhat surprising given that the combined company will generate about $1 billion a year in EBITDA and carry a reasonable leverage ratio of 3.2 to 3.4 times.
This may be one of those investor reactions that creates a buying opportunity.
Regardless, the strategic aspects of the deal are intriguing. Both companies, of course, have slots and games, but of interest is the combining of IGT’s systems business and Everi’s fintech business.
That has caused a number of people to ask what’s next. Will other games-systems companies like Light & Wonder, Aristocrat and Konami seek out fintech and payments partners like Pavilion Payments or Sightline? Or would a GeoComply make a neat tuck-in for a larger company that wants to be a full-service provider?
With capital markets perhaps starting to loosen and all of the other flux in the gaming space it would not be surprising to see more deals, even given the so-far deflating reaction to IGT-Everi.
One company that may be particularly interesting is Inspired Entertainment. We’ve written about Inspired before as a growth company. A quick look at the multibillion-dollar revenue potential of virtual sports alone, a space that Inspired dominates, can set bells ringing.
Throw in its iLottery product, growing VLT business and high-margin and growing digital business and there’s a lot of potential growth. But at a market cap today of under $250 million, the company might make a tempting target. And given the inability to date for its stock to realize that value, a sale could be the best and fastest route to that end.
There are plenty of other merger and acquisition candidates and strategic rationales in gaming that can be explored, but the point is the same—companies that combine games, systems, fintech and iLottery could be the way of the future.
PERSONAL NOTE
The just-completed East Coast Gaming Congress run by attorney Lloyd Levinson and consultant Mike Pollock was dedicated to the memory of Steve Norton, who died last autumn.
It was appropriate, given that the conference is based in Atlantic City where Steve ran Resorts Hotel and Casino, the first casino in the nation outside of Nevada.
It may be hard to understand today how huge and revolutionary a development that was, and how the booming success of Resorts and Atlantic City gave confidence to legislators throughout the nation to legalize gaming over the next two decades.
The word pioneer is often used loosely, but Steve was a true pioneer, not only in opening Resorts, but in helping gaming expand elsewhere.
I was honored to be asked to contribute to the video tribute to Steve, and in turn thankful for the kind words from his son Rob and Rob’s boss, David Cordish of Cordish Cos., about my comments.
It was a reminder of the fact that as big an industry as U.S. gaming has become, it is still small enough that personal relationships matter in ways not necessarily the case elsewhere.
So, thanks to Lloyd and Mike for reinforcing that by honoring one of the nicest guys anyone will ever meet.
