Consolidation is redrawing the US machine gaming map. The latest merger—and the biggest at $6.4 billion—has GTE CH, the world’s largest lottery provider, in possession of the largest slot-maker, IGT
GTECH is buying International Game Technology for US$4.7 billion in cash and stock, uniting the world’s largest provider of lottery systems with the biggest slot machine maker.
The deal is the latest in a series of mega-mergers that is changing the machine gaming landscape dramatically, highlighted over the last year by Scientific Games’ $1.5 billion purchase of WMS, Bally Technologies’ $1.3 billion purchase of SHFL entertainment and Aristocrat’s more recent $1.28 billion purchase of Video Gaming Technologies.
The GTECH-IGT combination would have more than $6 billion in revenues and more than $2 billion in cash flow based on results for the 12 months ended 31st March.
GTECH will pay $18.25 for each share of Reno, Nev.-based IGT— $13.69 in cash plus 0.1819 shares in a newly formed holding company to be based in the UK, the Italian company said in a statement. It worked out to a premium of about 18% on IGT’s closing price of $15.50 when the deal was announced. The total transaction amounts to about $6.4 billion, including $1.75 billion in IGT debt. GTECH shareholders will own about 80% of the new company while IGT shareholders will own the rest, according to the statement.
The acquisition is subject to the approval of shareholders of both companies and is expected to be completed in the first or second quarter of 2015, according to the statement.
When it closes it will make GTECH a significantly larger player in the industry worldwide at a time when its core Italian and European markets are grappling with slower growth and competition from Web gambling and IGT is steadily losing its grip on the US markets it has long dominated amid slowing casino revenue growth nationwide.
US-based Eilers Research projects the installed base of slot machines in North America to increase only about 1.2% over the next eight years, down from approximately 5% in the mid-2000s, while IGT has seen its share of slot machines sold in North America fall from more than 60% in 2003 to 41% last year. The company also has lost key personnel.
The combined business will be operated under the GTECH brand. The company will be based in the United Kingdom and maintain operating headquarters in Rome and in Las Vegas and Providence, Rhode Island, where the GTECH division is based. The new company is expected to apply for listing solely on the New York Stock Exchange. IGT’s shares will cease trading in New York and GTECH’s shares will cease trading on the Borsa Italiana.
IGT Chief Executive Patti Hart said the merger “redefines the future of the gaming industry”.
“Together we are uniquely positioned to provide the industry’s broadest and most innovative portfolio of best-in-class products, solutions and services.”
“This transaction is transformational for our business,” GTECH Chief Executive Marco Sala said. “With limited overlap in products and customers, the combined company will enjoy leading positions across all segments of the gaming landscape.”
Mr Sala will serve as CEO of the new company. IGT Chairman Phil Satre will serve as chairman and Ms Hart will become vice chairman.
GTECH will finance the cash portion of the acquisition through a combination of cash on hand and new financing, it said. The company said it has binding commitments of $10.7 billion from Credit Suisse, Barclays and Citigroup. The joint company will be carrying net debt of 4.5 times to 4.9 times EBITDA, which may be reduced by 0.5 times to 0.6 times after an estimated $280 million in annual cost savings kick in, GTECH CFO Alberto Fornaro said.
GTECH itself is the product of a 2006 merger with Lottomatica, Italy’s largest lottery operator. GTECH at the time had already entered the machine gaming business with its purchases of slots and systems makers Atronic and Spielo.
