IGT Global Gaming, PlayDigital Combining with Everi in $6.2B Deal

Posted on: February 29, 2024, 12:20h. 

Last updated on: May 8, 2024, 10:30h.

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

International Game Technology (NYSE: IGT) announced a long-awaited move for its global gaming and PlayDigital units, telling investors Thursday that those businesses will merge with Everi (NYSE: EVRI) in a $6.2 billion deal.

Everi stock
A slide from an Everi Holdings investor presentation. The company is merging with IGT’s global gaming and PlayDigital units in a $6.2 billion deal. (Image: Seeking Alpha)

Under the terms of the transaction, IGT investors will own 54% of the new company, while Everi shareholders will control the remainder. IGT CEO Vince Sandusky will assume the same role at the newly formed entity, with Everi Executive Chairman Michael Rumbolz becoming chairman of the board.

Last June, the company 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. Commanding $6.2 billion for the global gaming and PlayDigital arms unlocks value for IGT investors, as highlighted by the fact that the stock entered Thursday with a market capitalization of $5.34 billion.

The transaction will be executed through a series of steps pursuant to which IGT will spin off a subsidiary owning its Global Gaming and PlayDigital businesses to IGT shareholders. That entity will then combine with Everi, with IGT shareholders receiving shares of Everi common stock and Everi continuing as the parent company. IGT shareholders will receive approximately 103.4 million Everi shares, resulting in an approximate 54% ownership interest in the combined company with existing Everi stockholders owning the balance,” according to a statement issued by the companies.

The deal is expected to close late this year or in early 2025. Following closure, the combined company will retain the IGT name and trade under that ticker on the New York Stock Exchange (NYSE). The new firm will be based in Las Vegas, which is Everi’s current home.

Benefits of IGT/Everi Marriage

IGT is known as the maker of the popular Wheel of Fortune slot machines. But the marriage with Everi not only bolsters its slot operations and scale, but brings fintech, iGaming, and sports betting exposure under a single, vertically integrated umbrella.

The new IGT could generate 2024 sales of $2.7 billion on earnings before interest, taxes, depreciation, and amortization (EBITDA) of approximately $1 billion. The deal could create $85 million in savings and help the combined entity notch $800 million in annual free cash flow in the second year post-closing.

The combined company is taking on $2.6 billion in debt, which will be distributed to IGT investors. It’s expected that the new firm will have 2024 net debt/EBITDA of 3.2x to 3.4x, but “a path to rapid de-leveraging” could be realized. One analyst said it’s possible Everi could draw takeover offers from other suitors looking for North American slots exposure.

“We do question whether the announcement could lead to a competitive takeout offer for EVRI (unlikely for IGT, given a thorough process was just run),” noted Stifel analyst Jeffrey Stantial. “Private equity has demonstrated interest in gaming payments given industry-specific moat, while EVRI offers a more digestible option vs. IGT for international manufacturers (e.g. Novomatic) or digital pure-plays (Evolution; Games Global) looking to establish presence in US.”

IGT Lottery Thesis Cleaned Up

With the spin-offs of IGT’s Global Gaming and PlayDigital businesses, the company’s highly profitable through underappreciated lottery unit might generate more attention in the investment community. Lottery accounts for 75% of IGT’s pro forma earnings.

The company’s lottery arm will become a “premier pure play lottery business with a diversified contract mix, the broadest global reach, and a strong presence across markets,” according to the statement.

Assuming the transaction with Everi proceeds, the IGT lottery business will take a new name and trade on the NYSE under another ticker.