425: IGT Clarifies Spin-Off and Merger with Everi in Q&A

IGT addresses key questions regarding the spin-off of its Global Gaming and PlayDigital businesses and their subsequent merger with Everi, clarifying the roles of SpinCo, RemainCo, and CombineCo.

Summary

• IGT has provided answers to frequently asked questions regarding the upcoming spin-off of its Global Gaming and PlayDigital businesses and their merger with Everi.
• SpinCo will hold the IGT Global Gaming and PlayDigital businesses and will merge with Everi.
• RemainCo will be the standalone Global Lottery business after the spin-off.
• CombineCo refers to the merged entity of Everi and SpinCo, which will adopt the IGT name and brand.
• The spin-off and merger are subject to conditions including antitrust clearance, regulatory approvals, and shareholder approvals from both IGT and Everi.
• iLottery will remain part of the remaining lottery organization (RemainCo), with sales growing by 40% between 2022 and 2023.
• Both RemainCo and CombineCo will continue to support the Oregon Lottery.
• IGT and Everi are independently developing plans to address potential conflicts in New York regarding VLT systems and game provision.
• Northstar New Jersey will remain with Global Lottery (RemainCo).
• Third-party content like Wheel of Fortune will be licensed by SpinCo and sublicensed to RemainCo.
• The software code for remote game servers (RGS) has been separated for Global Lottery and PlayDigital.
• Global Gaming's Advantage casino management system could be integrated with Everi's fintech products.
• Integration planning will assess manufacturing operations and gaming operations to ensure competitiveness.
• IGT Pay will be separated, rebranded by RemainCo, and offered to customers, complementing Everi's fintech solutions.
• Very few gaming contracts are expected to be negatively impacted by the transaction.
• Global Gaming includes game studios, gaming technology, electronic gaming machines, and systems sales and support.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook on the transaction, highlighting potential synergies and growth opportunities. However, it also acknowledges risks and uncertainties, resulting in a moderately positive sentiment score.

Positives

• The transaction is expected to create a stronger combined gaming entity (CombineCo).
• iLottery's continued growth presents a significant opportunity for the remaining lottery organization.
• The potential integration of Advantage with Everi's fintech products could create synergies.
• The transaction is expected to have minimal negative impact on existing gaming contracts.
• Global Gaming's existing global studios footprint will be complemented by Everi's content, allowing for international distribution.

Negatives

• The document highlights the need to address potential conflicts in New York regarding VLT systems and game provision.
• Integration planning is still in early stages, creating uncertainty regarding manufacturing and gaming operations.

Risks

• The spin-off and merger are subject to regulatory and shareholder approvals, which may not be obtained.
• The anticipated benefits and synergies of the transaction may not be realized.
• There are risks associated with separating and integrating the Spinco Business.
• The announcement or consummation of the transaction could negatively affect the market price of Everi and IGT stock.
• The transaction involves significant costs, fees, and expenses.
• Economic changes in global markets, such as currency exchange, inflation, and interest rates, could impact the combined company.
• Regulation and litigation matters could impact the transaction or the gaming industry generally.
• There are risks related to intellectual property, privacy matters, and cybersecurity.

Future Outlook

The document expresses optimism about the potential for continued growth in iLottery and the benefits of combining Global Gaming and Everi's operations, but acknowledges that the transaction is subject to various risks and uncertainties.

Management Comments

• A multifaceted project is underway to create not just a new brand identity for Global Lottery, but also to redefine the organization's vision, mission, values, its brand promise to customers and key stakeholders, and its brand purpose for employees.
• We are excited to explore the possibility of integrating Advantage with Everi's financial technology (fintech) products.
• We understand the desire for clarity in this area, along with all other facets of integration, and we are committed to providing as much information as we can as soon as we can.
• We believe our studio organization will benefit from the transaction.

Industry Context

This announcement reflects the ongoing consolidation trend in the gaming industry, with companies seeking to expand their product offerings and geographic reach through mergers and acquisitions. The combination of IGT's Global Gaming and PlayDigital businesses with Everi aims to create a more diversified and competitive player in the market.

Comparison to Industry Standards

• The merger of IGT's Global Gaming and PlayDigital businesses with Everi is similar to other large-scale mergers in the gaming industry, such as Scientific Games' acquisition of Bally Technologies, which aimed to create a comprehensive gaming solutions provider.
• The focus on integrating casino management systems (Advantage) with fintech solutions mirrors trends seen with companies like Aristocrat Technologies, which have been expanding their offerings in both areas.
• The growth of iLottery aligns with the broader industry trend of increasing online gaming and lottery sales, as seen with companies like NeoGames and Pollard Banknote.

Stakeholder Impact

• Shareholders of IGT and Everi will be impacted by the transaction, requiring their approval.
• Employees of IGT, Everi, and SpinCo will be affected by integration planning and potential organizational changes.
• Customers of IGT and Everi can expect continued support and potentially new product offerings.
• Vendors and other business partners will need to adapt to the new combined entity.

Next Steps

• Obtaining antitrust clearance.
• Granting of gaming and financial services regulatory approvals.
• Approvals by IGT PLC shareholders and Everi stockholders.
• Integration planning for manufacturing and gaming operations.
• Assessment of facilities of Global Gaming, PlayDigital and Everi.
• Formalizing the terms of the separation of software code for remote game servers (RGS).

Key Dates