425: Everi and IGT's Global Gaming and PlayDigital Businesses to Merge, Forming Gaming and FinTech Powerhouse

Everi and IGT's Global Gaming and PlayDigital businesses will combine to create a comprehensive global gaming and fintech enterprise, with IGT shareholders expected to own approximately 54% and Everi stockholders expected to own approximately 46% of the combined company.

Summary

• Everi Holdings Inc. and International Game Technology PLC have entered into definitive agreements to combine IGT's Global Gaming and PlayDigital businesses with Everi.
• IGT will spin off these businesses into a subsidiary (Spinco) and then merge it with Everi.
• IGT shareholders will receive approximately 103.4 million Everi shares, resulting in an approximate 54% ownership interest in the combined company, while existing Everi stockholders will own approximately 46%.
• The combined company will be valued at approximately $6.2 billion on an enterprise value basis.
• IGT will receive approximately $2.6 billion in cash, funded by debt incurred by the combined company.
• IGT intends to allocate approximately $2 billion to debt repayment and the remaining amount to separation expenses, tax leakage, and general corporate purposes.
• The transaction is expected to close in late 2024 or early 2025, pending regulatory and shareholder approvals.
• Following the closing, Everi will change its name to International Game Technology, Inc. and trade on the NYSE under the ticker IGT.
• The combined company is projected to have approximately $2.7 billion in revenue and $1 billion in Adjusted EBITDA in 2024.
• The combined company is expected to generate over $800 million of annual Adjusted cash flow in the second year following the closing, including realized synergies.

Sentiment

Score: 8

Explanation: The document presents a positive outlook on the merger, highlighting strategic and financial benefits, synergy opportunities, and a strong leadership team. The language used is optimistic and confident, suggesting a high likelihood of success.

Positives

• The merger creates a comprehensive and diverse product portfolio, offering a one-stop-shop for land-based gaming, iGaming, sports betting, and fintech.
• The combined company is expected to achieve impressive financial scale, with projected pro forma 2024 revenue of approximately $2.7 billion and Adjusted EBITDA of approximately $1 billion.
• Significant synergy opportunities are expected, including cost savings and capital expenditure efficiencies of approximately $85 million.
• The strong balance sheet and substantial cash flow generation will provide flexibility to pursue organic and inorganic investments and return capital to stockholders.
• The combined company is projected to generate over $800 million of annual Adjusted cash flow in the second year following the closing, including realized synergies.

Risks

• The transaction is subject to regulatory and shareholder approvals, and there is a risk that these approvals may not be obtained.
• There is a risk that the anticipated benefits and synergies of the Proposed Transaction may not be realized.
• The integration of the two businesses may present challenges.
• The spin-off of IGT's Global Gaming and PlayDigital businesses is expected to be taxable to IGT shareholders for U.S. federal income tax purposes.

Future Outlook

The combined company is expected to deliver a comprehensive range of products and services that will engage gaming patrons and drive efficiencies and revenues to customers, with a focus on organic and inorganic investments and returning capital to stockholders.

Management Comments

• Marco Sala, IGT Executive Chair of the Board, stated that the transaction will combine two robust gaming platforms with complementary capabilities, geographic footprints, and enhanced growth opportunities.
• Vince Sadusky, IGT CEO, added that 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.
• Michael Rumbolz, Everi Executive Chairman, stated that the merger combines two highly complementary businesses in a transformational manner, creating a global, land-based and digital gaming, fintech and systems business.

Industry Context

This announcement reflects a trend towards consolidation in the gaming industry, with companies seeking to expand their product offerings and geographic reach to better compete in a rapidly evolving market.

Comparison to Industry Standards

• Comparable companies in the gaming industry include Scientific Games (now Light & Wonder), Aristocrat Leisure, and Konami Gaming.
• The projected revenue and EBITDA figures for the combined company are competitive with those of other major players in the industry.
• The synergy targets of $85 million are typical for mergers of this size and scope.

Management Changes

Stakeholder Impact

• The transaction is expected to create value for stockholders of the combined company.
• The transaction is expected to benefit customers through a comprehensive range of products and services.
• The transaction is expected to provide employees with opportunities for growth and development.
• The transaction is expected to benefit IGT's Global Lottery business by allowing it to operate as a pure play global lottery player.

Next Steps

• The transaction is subject to receipt of regulatory approvals.
• The transaction is subject to approval by Everi stockholders and IGT shareholders.
• The parties will work to satisfy other customary closing conditions.
• The transaction is expected to close in late 2024 or early 2025.

Key Dates