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International Game Technology (IGT) has announced a deal to spin off its gaming and digital businesses and combine them with Everi Holdings in a deal that values the new company at $6.2bn.
Under the terms of the deal announced Thursday (February 29), IGT’s global gaming and PlayDigital businesses will be spun off from its lottery division, which accounts for more than half its revenue, into a separate publicly traded company. That new company will merge with Everi, with the combined businesses using the IGT name.
IGT CEO Vince Sadusky said the process began last June with a strategic review of IGT’s business and a goal of unlocking the full value of “IGT’s market leading assets.”
“The transaction announced today is a key milestone in that process,” Sadusky told analysts in a conference call to explain the reasoning behind merging with Las Vegas-based Everi.
When the transaction closes later this year or early in 2025 following receipt of regulatory approvals, current IGT shareholders will control 54 percent of the new IGT with Everi shareholders owning the other 46 percent in a company that will remain traded on the New York Stock Exchange (NYSE).
IGT’s current lottery business will take on a new name and also trade on the NYSE under a new ticker symbol. Sadusky will continue as CEO of the new company, while Everi CEO Randy Taylor will become a member of the IGT board.
Taylor told analysts the merger with IGT would help Everi bring its fintech and cashless gaming systems into international markets at lower costs.
“Clearly for us to get global, that was going to be a big endeavour... with a high cost,” said Taylor.
Everi executive chairman Mike Rumbolz, a former Nevada regulator and seasoned casino executive, will become chairman of the new IGT board.
From IGT’s perspective, Sadusky told analysts that the company had been frustrated that after reporting record results for the past two years, “we continue to trade at an inferior multiple… to both our lottery peers and our gaming peers.”
The divestment and merger with Everi follows a similar transaction pursued by chief rival Scientific Games two years ago to split into three distinct businesses in gaming supplier Light & Wonder, lottery provider Scientific Games and sports-betting platform and services company OpenBet.
Sadusky said IGT had multiple conversations with counterparts to explore various strategic alternatives.
“It was pretty clear the separation of the businesses… was really key to unlocking value [rather than] having these two separate businesses within the same company,” Sadusky said.
IGT’s global gaming division includes its slot machine and electronic table games services and systems business. The company’s digital business includes its internet gaming technologies and game portfolio, sports-betting platform and sports betting management operations.
“It would take a significant offer in a sales scenario to convince us… that we should realize a gain and be done with this business,” Sadusky said of IGT’s gaming division. “The separation is really enhanced by combining with another entity, and when we had our conversations with Everi it became really clear to us that this is the best alternative.”
Sadusky said there should be no leakage in terms of negative synergies or divestments that are necessary as a result of the deal.
“We are in amazingly complementary product lines, given their strength in fintech,” Sadusky said. “We are not in fintech; we are in systems. We are both pursuing cashless but with different industry leading competencies.”
The transaction implies an enterprise value for IGT's global gaming and digital businesses of $4bn, and an enterprise value for Everi of $2.2bn. The $6.2bn valuation is 6.2 times EBITDA, or earnings before interest, taxes, depreciation and amortization.
In a research note for investors, Barry Jonas, a gaming analyst with Truist Securities, said the IGT-Everi merger “creates a one-stop shop across land-based gaming, iGaming, sports betting, and fintech.”
“Specifically, we think adding Everi’s fintech business with IGT’s system business would create a more complete all-in-one offering with a strong back-end product portfolio,” Jonas wrote. “Everi’s tribal [gaming industry] strength could also be additive to the combined company.”
According to IGT, the merged company would have a total installed base of 69,462 gaming machines, with 41,718 units sold annually and total revenue of $2.6bn. Broken down by segment, digital would product 10 percent of the revenue, with fintech at 14 percent, gaming sales at 35 percent, and gaming operations at 41 percent.
“The combined business could see scale benefits over time as a larger and more diversified supplier,” Jonas said. However, “we think this deal could create an opportunity in the near term for other manufacturers to gain share, as some operators may be hesitant to commit significant capital until the deal is closed and resulting strategy is clearer.”
Jonas also warned that the IGT deal with Everi could put some pressure on PlayAGS as the last remaining publicly traded independent gaming manufacturer to pursue a corporate action.
“That said, AGS’s independence and, in our view, strong product pipeline could provide benefits as operators look to maintain a diversified supplier footprint,” he wrote.
