425: IGT's Gaming and Digital Units to Merge with Everi, Forming Global Gaming and FinTech Powerhouse

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

Summary

• International Game Technology PLC (IGT) and Everi Holdings Inc. (Everi) have announced a definitive agreement to combine IGT's Global Gaming and PlayDigital businesses with Everi.
• IGT will spin off its Global Gaming and PlayDigital businesses to IGT shareholders in a taxable transaction.
• These spun-off businesses will then immediately combine with Everi.
• IGT shareholders are expected to own approximately 54% of the combined company, while Everi stockholders will own approximately 46%.
• The deal values the combined businesses at approximately $6.2 billion on an enterprise value basis.
• The combined company is projected to have pro forma 2024 revenue of approximately $2.7 billion and Adjusted EBITDA of approximately $1 billion.
• The transaction is expected to close in late 2024 or early 2025.
• After closing, Everi will change its name to International Game Technology, Inc. and will trade on the NYSE under the ticker IGT.
• IGT will receive approximately $2.6 billion in cash as part of the transaction, funded by 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.

Sentiment

Score: 8

Explanation: The announcement is generally positive, highlighting the strategic and financial benefits of the merger. The management teams of both companies are optimistic about the future prospects of the combined entity. However, there are some risks and uncertainties associated with the transaction, such as regulatory approvals and integration challenges.

Positives

• The merger creates a comprehensive and diverse product portfolio, offering a one-stop-shop for gaming and fintech solutions.
• The combined company is expected to achieve significant financial scale, with substantial revenue and Adjusted EBITDA.
• The transaction is projected to generate significant cost savings and capital expenditure efficiencies.
• The combined company will have a strong balance sheet and substantial cash flow generation, providing flexibility for investments and capital returns.
• The merger brings together a best-in-class team from both IGT and Everi.
• IGT's Global Lottery business will operate as a pure play global lottery player with a focused business model and optimized capital structure.

Negatives

• 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.
• The combined company will incur approximately $3.7 billion in debt, plus a $500 million revolver, to finance the transaction.
• There are risks associated with integrating the two businesses and achieving the expected synergies.
• The transaction is subject to regulatory and shareholder approvals, and there is a risk that the deal may not close.

Risks

• The transaction is subject to regulatory and shareholder approvals, and may not be completed.
• There are risks associated with integrating the two businesses and achieving the expected synergies and cost savings.
• The combined company will have a significant amount of debt, which could impact its financial flexibility.
• Changes in the gaming industry, economic conditions, or government policies could negatively impact the combined company's performance.
• The spin-off is taxable, which could impact IGT shareholders.

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. The transaction is expected to generate significant long-term value for stockholders of the combined company.

Management Comments

• Marco Sala, IGT Executive Chair of the Board, stated that the transaction is a key milestone in unlocking the intrinsic value of IGT's portfolio of industry-leading assets.
• Vince Sadusky, IGT CEO, added that the combination results in a comprehensive and diverse product offering, addressing more aspects of the gaming ecosystem.
• Michael Rumbolz, Everi Executive Chairman, stated that the merger combines two highly complementary businesses in a transformational manner.

Industry Context

This merger reflects a trend towards consolidation in the gaming industry, as companies seek to expand their product offerings and geographic reach. The combination of IGT's gaming assets with Everi's fintech solutions creates a more diversified and competitive player in the market.

Comparison to Industry Standards

• The combined company's projected revenue of $2.7 billion would place it among the larger players in the gaming and fintech industries, comparable to companies like Scientific Games (now Light & Wonder) and Aristocrat Leisure.
• The projected Adjusted EBITDA margin is strong, suggesting efficient operations and a valuable product portfolio.
• The projected net debt leverage ratio is manageable, indicating a healthy balance sheet and the ability to de-lever quickly.

Management Changes

Stakeholder Impact

• Shareholders of IGT and Everi will see a change in ownership structure and potential value creation through synergies.
• Employees of IGT and Everi may experience changes in roles and responsibilities as the companies integrate.
• Customers of IGT and Everi can expect a broader range of products and services.
• Suppliers of IGT and Everi may see changes in procurement processes and relationships.
• Creditors of IGT and Everi will be impacted by the new debt structure of the combined company.

Next Steps

• Obtain regulatory approvals.
• Obtain approval from Everi stockholders and IGT shareholders.
• Satisfy other customary closing conditions.
• Close the transaction in late 2024 or early 2025.
• Integrate the two businesses and achieve the expected synergies.
• Change Everi's name to International Game Technology, Inc. and trade on the NYSE under the ticker IGT.

Key Dates