Apollo Surprises With $6.3B Bid for Everi, IGT Gaming Biz

Posted on: July 26, 2024, 03:03h. 

Last updated on: July 26, 2024, 03:03h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of Everi (NYSE: EVRI) and International Game Technology (NYSE: IGT) surged Friday after Apollo Global Management (NYSE: APO) emerged as a surprise bidder for Everi and IGT’s global gaming and PlayDigital arms. The private equity firm offered $6.3 billion for those businesses.

Everi stock
A slide from an Everi Holdings investor presentation. Apollo emerged as a surprise suitor for the company and IGT’s global gaming and PlayDigital units. (Image: Seeking Alpha)

In February, IGT and Everi announced a $6.2 billion deal in which the pair of the lottery giant’s units would merge with Everi. Apollo slightly topped that price in what is the largest announced acquisition this year in the gaming industry. Under the terms of the deal, Apollo will pay $4.05 billion in gross proceeds to IGT and $14.25 a share to Everi investors — a 56% premium to that stock’s July 25 closing price. Rumors surfaced last September that Apollo was interested in the IGT assets.

The acquisitions of IGT Gaming and Everi by the Apollo Funds are cross-conditioned. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval by Everi stockholders, and is expected to be completed by the end of the third quarter of 2025. IGT shareholder approval is not required for the transaction,” according to a statement.

Everi is scheduled to release second-quarter results on Aug. 9, but due to the Apollo announcement, the slot machine manufacturer will not host an earnings conference call. IGT will proceed with its earnings call on July 30 because it remain a publicly traded company focusing on lottery operations and sales following the Apollo transaction.

Apollo Deal Appears Better for IGT Investors

In June 2023, IGT announced it was considering strategic alternatives for its global gaming and PlayDigital units. At that time, it was expected that IGT’s slot machine business alone could fetch $4 billion to $5 billion in a sale.

While the merger with Everi adequately valued those IGT businesses, some investors in the latter weren’t thrilled about a planned equity distribution from Everi shareholders that would have brought unfavorable tax implications. The Apollo transaction cleans that up while allowing IGT to focus on its core lottery business.

“Post-transaction, IGT is a better-capitalized lottery pure-play. Overall, solid lottery industry and company-specific trends continue, in our view, with potential new innovations to drive SSS ahead (potential Mega Millions price increase, etc.),” wrote B. Riley analyst David Bain in a note to clients today.

When the Apollo transaction is completed, IGT will change its name and stock ticker, “becoming a premier pure play lottery business,” according to the statement.

Deal Could Be Harbinger of More Gaming M&A

Apollo is familiar with the gaming device business  as it was previously the largest investor in PlayAGS (NYSE:AGS), which is also in the process of being acquired. The private equity firm liquidated that stake in November 2022.

Bain says the deal with IGT and Everi could be a sign of more gaming industry consolidation activity to come because buyers can find targets that are more valuable than current share prices imply.

“We continue to believe active M&A in the gaming industry demonstrates intrinsic values are much greater than current public valuations,” added the analyst. “Apollo is well-known by both investors and the gaming industry, and we believe it is well-suited (and capitalized) to assist in the combination of IGT and EVRI and support the combined company’s strategic initiatives. Net, we believe IGT Gaming and EVRI are stronger with Apollo.”

Indeed, Apollo is familiar to gaming investors as the private equity firm is frequently tied to an array of industry takeover rumors and it currently operates the Venetian on the Las Vegas Strip as well as other wagering assets.