8-K: Bally's to Become Intralot Majority Shareholder in Gaming Deal

Bally's Corporation will become the majority shareholder of Intralot S.A. following Intralot's acquisition of Bally's International Interactive business for €2.7 billion.

Summary

• Intralot S.A. is acquiring Bally's International Interactive business, a subsidiary of Bally's Corporation, for an enterprise value of €2.7 billion.
• The consideration for the acquisition includes €1.530 billion in cash and €1.136 billion in newly issued Intralot shares (873,707,073 shares at an implied value of €1.30 per share).
• As a result of the transaction, Bally's Corporation is expected to become the majority shareholder of Intralot.
• The combined entity, the Post-Acquisition Group, is projected to have over €1.0 billion in Pro Forma Sales Proceeds and approximately €419 million in Pro Forma Run-Rate Adjusted EBITDA for FY2024, with a 39% margin.
• The transaction is expected to close in the fourth quarter of 2025, subject to corporate and regulatory approvals.
• Intralot plans to launch an approximately €400 million share capital increase and secure €1.6 billion in permanent debt capital to fund the cash consideration and refinance existing debt.
• The Post-Acquisition Group is targeting a net leverage of approximately 3.2x (on LTM PF RR Adjusted EBITDA including synergies) post-acquisition, with a mid-term steady-state net leverage target of ~2.5x.
• The combined group anticipates realizing €35 million to €40 million in run-rate cost synergies over 18-24 months post-closing.

Sentiment

Score: 8

Explanation: The filing presents a highly positive outlook on a strategic acquisition, emphasizing significant growth opportunities, strong financial projections, substantial synergies, and a leading market position for the combined entity. While there's mention of leverage and forward-looking statement risks, the overall tone and detailed projections are very optimistic.

Positives

• The acquisition creates a global gaming champion with leading positions in iGaming and Lottery, boasting a diversified business mix and market-leading technology.
• The Post-Acquisition Group is projected to have over €1.0 billion in Pro Forma Sales Proceeds and approximately €419 million in Pro Forma Run-Rate Adjusted EBITDA for FY2024, indicating strong financial performance.
• The combined entity benefits from a highly complementary and easy-to-integrate tech stack, enabling a truly integrated iGaming and lottery technology provider and operator.
• Significant growth levers are identified, including cost synergies (€35m-€40m run-rate), expansion into new markets, and growth opportunities with new and existing customers.
• The transaction provides access to a significantly enlarged global total addressable market (TAM) of over €200 billion by 2029E, with a unique position in the gaming value chain.
• Bally's International Interactive business (BII) demonstrates best-in-class financial performance with a 38% UK EBITDA margin in FY2024, outperforming key peers, and efficient marketing spend (11% of NGR).
• Intralot maintains a strong track record of recurring revenues with ~€1.4 billion in contracted sales proceeds backlog and an 89% contract renewal rate.
• The Post-Acquisition Group is well-positioned to capitalize on the secular trend of digital transition across Lottery and Gaming, given high player and tech overlap.
• The commercial arrangement with Bally's North America Interactive is expected to provide exposure to the attractive US iGaming market, with profitability forecasted as early as 2027.
• The combined group projects robust cash flow generation with a ~95% FY2024 Pro Forma Run-Rate Operating Free Cash Flow conversion, supported by low maintenance capital expenditure requirements.

Negatives

• The acquisition involves significant debt financing (€1.6 billion bridge loan commitments) and a share capital increase (€400 million), which could impact existing shareholders through dilution or increased financial risk.
• The initial net leverage of approximately 3.2x post-acquisition, while having a mid-term target of 2.5x, represents a notable debt burden.
• Forward-looking statements and financial guidance are subject to significant uncertainties, including macroeconomic conditions, exchange rates, and the realization of anticipated synergies, which may not materialize as expected.

Risks

• Actual events may differ materially from forward-looking statements due to inherent risks and uncertainties related to future events and circumstances.
• Changes of plans or targets based on market circumstances, actual events or results, or the actual performance of the Intralot Group, Bally's Group, and Target Group.
• Developments in the industries in which the Intralot Group, Bally's Group, and Target Group will operate.
• Future capital expenditures and acquisitions may not yield expected returns.
• Disruption in general economic and business conditions, particularly in geographic areas where business may be concentrated.
• The realization of synergies from the Bally's International Interactive Business acquisition, including reductions in agency costs, GCA expenses, IT costs, marketing, and successful implementation of voluntary employee exits, may not be fully achieved.
• The ability to continue capitalizing on leading positions in key markets, successfully pursuing new contracts and expansion opportunities, increasing cross-sales, capitalizing on complementary technologies, and leveraging pre-existing relationships with regulators.
• The commercial arrangement with Bally's North America Interactive is subject to obtaining and maintaining all necessary governmental and regulatory licenses, permissions, consents, and permits; failure to do so, or if the North America Interactive business doesn't achieve positive adjusted EBITDAR in the timeframe currently envisaged, the potential benefits may not be realized or may be limited.
• The achievement of forecast data, particularly EBITDA guidance, relies on positive seasonality experienced in prior years during H2 for the Intralot Group and higher royalty revenue for BII, which may not recur.

Future Outlook

The Post-Acquisition Group anticipates strong financial performance with high-single digit total revenue growth in the mid-term, driven by low-to-mid single digit growth in Lottery and mid-single digit growth in iGaming. The group expects to achieve mid-to-high 30% Adjusted EBITDA margins, supported by €35 million to €40 million in run-rate cost synergies. Net leverage is targeted to de-leverage towards ~2.5x in the mid-term, and the company plans to maintain a 35% dividend payout ratio. Significant growth opportunities are identified in new B2C market entries, charity lottery, US iLottery technology, iLottery digital content, B2B cross-selling, and servicing revenue from Bally's North America Interactive, which is forecasted to become profitable as early as 2027.

Management Comments

• Promote Responsible Gaming, Social Responsibility, and Integrity throughout our global activities in any type of engagement Intralot

Industry Context

This acquisition aligns with the broader industry trend of digital transformation and convergence in the gaming sector. The combined entity aims to capitalize on the increasing digital penetration in both lottery and iGaming markets, which are experiencing significant growth. The strategic move positions the Post-Acquisition Group as a scaled global operator with a unique omnichannel offering, allowing it to compete effectively in a rapidly evolving landscape where integrated technology solutions and diversified product portfolios are key to market leadership. The focus on regulated markets and responsible gaming also reflects a growing industry emphasis on sustainability and compliance.

Comparison to Industry Standards

• Bally's International Interactive (BII) is positioned as the #2 UK iGaming Operator, demonstrating a strong market presence.
• Intralot is a Top 3 US Lottery Solutions Operator and a Top 3 North America VLT Monitoring Operator, indicating its leadership in specific B2B segments.
• BII's UK EBITDA Margin of 38% in FY2024 has outperformed key peers, including Competitor 1 (33%), Competitor 2 (29%), Competitor 3 (21%), and Competitor 4 (18%), highlighting superior operational efficiency.
• BII's marketing spend relative to Net Gaming Revenue (NGR) at 11% is lower than several competitors (e.g., Competitor 1 at 25%, Competitor 2 at 24%), suggesting more efficient customer acquisition and retention strategies.
• Intralot's growth to a #3 player in the US lottery market over 20+ years, often by migrating contracts from incumbent operators, showcases its competitive strength and execution capabilities.

Corporate Governance

Related Party Transactions

• Bally's Corporation, currently Intralot's largest shareholder, is expected to become the majority shareholder of Intralot as a result of the acquisition of its subsidiary, Bally's International Interactive business, by Intralot. This creates a significant related-party relationship where Bally's will have substantial influence over Intralot.

Stakeholder Impact

• **Shareholders (Bally's):** Will receive a combination of cash (€1.530 billion) and new Intralot shares (€1.136 billion), and will become the majority shareholder of Intralot, gaining significant influence over the combined entity's future direction and potential for long-term value creation.
• **Shareholders (Intralot):** Will experience dilution from the issuance of new shares for the acquisition and the planned €400 million capital raise, but stand to benefit from the enhanced market position, diversified revenue streams, and projected growth and synergies of the combined global gaming powerhouse.
• **Employees:** The realization of cost synergies includes 'successful implementation of voluntary employee exits,' indicating potential workforce adjustments in certain areas.
• **Customers:** Expected to benefit from an enhanced and integrated gaming experience due to the combined and complementary technology stacks, leading to more diverse product offerings and improved player engagement tools.
• **Regulators:** The Post-Acquisition Group emphasizes its long-standing relationships with regulators and a strong commitment to responsible gaming, suggesting continued adherence to high standards and collaborative engagement with regulatory bodies.
• **Creditors:** The company plans to raise €1.6 billion in permanent debt capital, which will impact the combined entity's debt profile and leverage, potentially affecting credit ratings and future borrowing costs.

Next Steps

• Closing of the transactions contemplated in the agreement, expected in the fourth quarter of 2025.
• Intralot to launch an approximately €400 million share capital increase, subject to corporate and regulatory approvals.
• Intralot to secure €1.6 billion in permanent debt capital to replace bridge loan commitments.
• Realization of €35 million to €40 million in run-rate cost synergies over 18-24 months post-closing.
• Targeted launch of new iGaming markets in 2026 and 2027.
• Continued efforts to achieve profitability for Bally's North America Interactive business, potentially as early as 2027.

Key Dates

Recommendation

The acquisition is highly strategic, creating a global gaming powerhouse with leading positions in both iGaming and Lottery. The combined entity projects robust financial performance, including over €1 billion in pro forma sales and a 39% EBITDA margin for FY2024, with significant cost synergies of €35-€40 million expected. The clear mid-term guidance for high-single digit revenue growth and mid-to-high 30% margins, coupled with strong cash flow generation and a commitment to de-leveraging, presents a compelling investment case. The exposure to the growing US iGaming market and the unique omnichannel offering further enhance its long-term growth potential, making it an attractive 'strong buy' for seasoned investors.

Keywords

Gaming, Lottery, iGaming, Ballys, Intralot, Acquisition, SEC Filing, Financial Reporting, Corporate Governance, Risk Management, Strategic Business Analysis, Online Gambling, Sports Betting, VLT, Capital Markets Day