Gtech, the operator of the Italian lottery, signed a deal to acquire International Game Technology, slot machines developer, based in Las Vegas, for the stunning amount of $4.7 billion in cash and stock.
IGT was constantly in the gambling news and a lot of speculations were discussed regarding its financial stability, before the confirmation of the deal with Gtech last month.
Gtech used to be Lottomatica Group, and Reuters reported that this agreement is the biggest foreign acquisition by an Italian company so far in 2014.
The importance of the deal
Gtech buys IGT
• The deal is for of $4.7 billion
• It’s the biggest foreign acquisition by an Italian company in 2014
• With this agreement Gtech finally got larger share of the US slots market
Last month, Citigroup’s analysts expressed an opinion that this purchase: “would create the dominant player in an industry facing headwinds from both sluggish trends and growing competition.”
Additionally, the analysts stressed on the benefits of the increased scale and the increased US market share for Gtech.
Marco Sala, Gtech Chief Executive Officer, who will also be CEO of the joint company, said during a conference call: “This is a transaction that we firmly believe will transform the gaming industry. We will have a library of games that will surpass that of any other company in the industry.”
After the announcement of the deal, it became clear that the companies will form a new holding company in the UK, with operating headquarters in Las Vegas, Rome and Providence, Rhode Island. The statement also explained that the company will delist from Borsa Italiana in Milan after the closure of the deal and it will apply for listing entirely on the New York Stock Exchange.
Todd Eilers, director of research at Eilers Research LLC in Anaheim Hills, explained in a phone interview for Bloomberg: “Gtech has been trying to increase its share of the US slot machine business, and this does that in a significant way. Given the sluggish growth in its domestic market and the increased competition, it was probably the best decision for IGT.”
The financial side
The shareholders of IGT will receive $13.69 in cash and 0.1819 of a share of the new company for each IGT share they have.
The value of the offer is $18.25/per share, which is 46% above the closing price of IGT’s shares on June 6, before the news of the sale came out. Later on the shares of IGT rose more than 11% in the premarket trading.
The new company, which will follow all US gambling laws, would have more than $6 billion in revenue and the estimated annual earnings are expected at $2 billion before interest, taxes, etc.
At the time being, this transaction is expected to be finalized in 2015, with Philip G. Satre, the chairman of IGT, as chairman of the new company, and Patti S. Hart IGT’s chief executive, as the future vice chairwoman.
Back in 2006, Lottomatica, controlled by the De Agostini family, bought the US lottery company Gtech for $4.65 billion and changed its previous name to Gtech in 2013.
So far,Gtech has received $10.7 billion in financing commitments from various institutions like Barclays, Credit Suisse and Citigroup.