In a blockbuster deal announced late last week, International Game Technology PLC (IGT) will spin off its slot supply and digital gaming businesses from its lottery business to create a separate company in combination with Las Vegas-based Everi Holdings, Inc. in a $6.2 billion transaction.
The new company will retain the name of IGT. IGT’s lottery division will take on a new name and will trade under a new symbol on the New York Stock Exchange.
IGT’s lottery division was itself created through merger, when the company was acquired by international lottery supplier GTECH in 2014. Everi was created that same year through a merger of slot supplier Multimedia Games with fintech leader Global Cash Access.
IGT will separate its Global Gaming and PlayDigital divisions by way of a taxable spin-off to IGT shareholders and then immediately combine the businesses with Everi to create “a comprehensive and diverse global gaming and fintech enterprise,” according to a press statement from IGT.
Under the terms of the agreements, at closing, IGT shareholders are expected to own approximately 54 percent and Everi stockholders are expected to own approximately 46 percent of the shares in the combined company. The transaction has been approved unanimously by all voting members of the boards of directors for both companies. The deal values the combined businesses at approximately $6.2 billion on an enterprise value basis.
The transaction follows IGT’s previous announcement that it was reviewing strategic alternatives to the gaming and PlayDigital businesses “as a way to unlock the intrinsic value of our portfolio on industry-leading assets,” said IGT Chairman Marco Sala in the press statement.
“The transaction announced today is a key milestone in that process. The transaction will combine two robust gaming platforms with complementary capabilities, geographic footprints, and enhanced growth opportunities. It also facilitates the separation of IGT’s Global Gaming and PlayDigital businesses from our Global Lottery business, resulting in a pure-play global lottery business. After closing, IGT’s shareholders will continue to 100 percent of IGT’s Global Lottery business, which is positioned for long-term success, and will own a majority of a combined company that offers global gaming, digital and fintech.”
“We are bringing together two businesses with complementary strengths that are stronger and more valuable together,” added IGT CEO Vince Sadusky. “The combination results in a comprehensive and diverse product offering, addressing more aspects of the gaming ecosystem across land-based gaming, iGaming, sports betting, and fintech.
“The creation of separate gaming and lottery companies, each with experienced management teams and simplified business models, better positions each company to service customers and create significant value for stakeholders.”
Michael Rumbolz, executive chairman of Everi Holdings, said the combination creates an entity more powerful than either company individually.
“We believe this merger combines two highly complementary businesses in a transformational manner, creating a global, land-based and digital gaming, fintech and systems business,” Rumbolz said. “We expect the combined company will deliver a comprehensive range of products and services that will engage gaming patrons and drive efficiencies and revenues to our customers.”
Initial reactions from Wall Street were positive. “The deal implies upside value for both names over time, given the compressed valuations of 4.4X and 5.5X our 2024E EBITDA for EVRI and IGT, respectively,” wrote David Katz of Jefferies Group. “We believe the combined company could utilize the stronger soft and hard resources from both entities, and bring the necessary scale to the market to compete with the leaders in gaming content and equipment. We expect both could trade higher over time.”
“The deal creates a one-stop shop across land-based gaming, iGaming, sports betting, and fintech,” Truist Securities gaming analyst Barry Jonas wrote in a research note, adding that the combination “would create a more complete all-in-one offering with a strong back-end product portfolio.”
Among the benefits to stockholders of the combination, according to IGT:
- “A comprehensive and diverse product portfolio—a one-stop-shop offering across land-based gaming, iGaming, sports betting, and fintech.
- “Impressive financial scale with projected pro forma 2024 revenue of approximately $2.7 billion and projected pro forma 2024 Adjusted EBITDA of approximately $1 billion.
- Large installed base with approximately 70,000 EGMs today generating significant recurring revenues
- “Compelling growth profile with significant synergies, including:
- Premier IP portfolio comprised of some of the most successful game franchises across product verticals;
- Opportunity to leverage the global sales team and distribution network of IGT’s Global Gaming and PlayDigital businesses to bring Everi’s existing content and fintech solutions to customers outside the United States;
- Approximately $85 million of identified cost savings and opportunities for capital expenditure efficiencies.
- “Strong balance sheet and substantial cash flow generation to provide flexibility to pursue organic and inorganic investments and return capital to stockholders.
- “Projected pro forma 3.2-3.4x net debt to 2024 adjusted EBITDA leverage ratio (including run-rate cost synergies) with a path to rapid de-leveraging.
- “Expect to generate over $800 million of annual Adjusted cash flow in the second year following the closing, including realized synergies.
- “Best-in-class team.”
The transaction will be executed through a series of steps pursuant to which IGT will spin off a subsidiary owning its Global Gaming and PlayDigital businesses to IGT shareholders. That entity will then combine with Everi, with IGT shareholders receiving shares of Everi common stock and Everi continuing as the parent company.
IGT shareholders will receive approximately 103.4 million Everi shares, resulting in an approximate 54 percent ownership interest in the combined company with existing Everi stockholders owning the balance. After closing, Everi will change its name to International Game Technology, Inc. and will trade on the NYSE under the ticker IGT.
In connection with the transaction, IGT will receive approximately $2.6 billion in cash that will be funded with the proceeds of debt incurred by the combined company. IGT expects to allocate approximately $2 billion to IGT debt repayment with the remaining amount allocated to separation and divestiture expenses, tax leakage and general corporate purposes. The transaction implies an enterprise value for IGT’s Global Gaming and PlayDigital businesses of approximately $4.0 billion, and an enterprise value for Everi of approximately $2.2 billion.
Financing commitments of $3.7 billion, plus a $500 million revolver, are being provided by Deutsche Bank and Macquarie Capital to the combined company. Approximately $1 billion of the proceeds will be used to refinance Everi’s existing debt, approximately $2.6 billion of the proceeds will be distributed to IGT, and the remainder will be used to pay the combined company’s financing fees.
Post-closing, current IGT CEO Vince Sadusky will lead the combined company, which will be headquartered in Las Vegas and managed by a best-in-class management team and top operational leadership from IGT and Everi.
Current IGT EVP Strategy and Corporate Development Fabio Celadon will serve as CFO of the combined company. Current Everi CEO Randy Taylor will be a member of the combined company board of directors. Current Everi CFO Mark Labay will assume the role of chief integration officer.
Michael Rumbolz, Everi executive chairman, will be chairman of the board of directors of the combined company, which will have 11 total members including six independent directors as required by New York Stock Exchange listing standards.
Six of the 11 members will be initially appointed by IGT, including CEO Vince Sadusky, and three of which will be appointed by De Agostini S.p.A., pursuant to an investor rights agreement. The balance of the directors will be initially appointed by Everi, and will include Everi President and CEO Randy Taylor.
Upon the successful completion of the transaction, IGT’s remaining operations will consist of its current Global Lottery business and corporate support functions.
