GTECH secures purchase of IGT for USD 4.7 billion

Rome-based GTECH operates lottery games world-wide, including the Lotto game in Italy and several state lotteries in the U.S. The deal, which includes an assumption of US$ 1.75 billion in IGT debt, will create a much larger global gambling company that covers multiple aspects of the market, the firms said.

IGT shareholders will receive a combination of US$ 13.69 in cash plus 0.1819 NewCo shares (subject to adjustment) for each share of IGT common stock, equal to an aggregate value of US$ 18.25 per IGT share.  GTECH shareholders will exchange each of their existing GTECH shares for one newly issued ordinary share of NewCo.  The aggregate transaction value is approximately US$ 6.4 billion inclusive of the assumption of approximately US$ 1.75 billion in existing IGT net debt. 

The transaction creates the world’s leading end-to-end gaming company, uniquely positioned to capitalize on opportunities across global gaming market segments, the firms said. The new company combines best-in-class content, operator capabilities, and interactive solutions, and joins IGT’s leading game library and manufacturing and operating capabilities with GTECH’s gaming operations, lottery technology and services.  The agreement drives scale across all businesses, geographies and product lines and is expected to achieve more than US$ 280 million in run-rate synergies by the third year following closing of the transaction.  

Commenting on the transaction, Marco Sala, CEO of GTECH said, “This transaction is transformational for our business. With limited overlap in products and customers, the combined company will enjoy leading positions across all segments of the gaming landscape.  It will increase our global scale and with a full suite of offerings and robust customer relationships across the client spectrum, the new company will have unparalleled capabilities to address the ongoing convergence across global gaming segments.  Our expertise across these segments and greater ability to invest in R&D will improve player experiences and benefit our government and business clients. The transaction will significantly enhance our cash flow and financial strength, and provide clear and achievable cost and revenue synergies.” 

“We are extremely pleased to reach a definitive merger agreement with GTECH as a result of our exploration of strategic alternatives to maximize shareholder value.  This outstanding combination of two global leaders truly defines the future of gaming entertainment. Together we are uniquely positioned to provide the industry’s broadest and most innovative portfolio of best-in-class products, solutions and services.  This strategic agreement positions us to further transform the industry while providing meaningful benefit and value to our customers, employees and shareholders,” said Patti Hart, IGT CEO. “Our dedicated employees’ commitment and innovation have enabled us to capitalize upon this opportunity, and we look forward to integrating with the GTECH team to achieve even greater levels of success.”

The combined entity would have more than US$ 6 billion in pro forma revenues and in excess of US$ 2 billion in pro forma EBITDA based on the last twelve trailing months as of March 31, 2014 at current exchange ratesi. The combined entity is expected to generate significant free cash flow and the transaction will be accretive on a cash earnings per share basis immediately.

Last month, GTECH said it had begun preliminary talks to buy IGT. At the time, however, private-equity firm Carlyle Group was also in talks to buy IGT, a person familiar with the discussions told The Wall Street Journal.

The combined entity would have more than US$ 6 billion in revenue, the companies said. In April, IGT said fiscal second- quarter net income fell 67% to US$ 25.7 million from a year earlier, while revenue fell 15% to US$ 513 million, on weaker sales of slot machines.