Although International Game Technology (IGT) had been scheduled to merge with Everi Holdings later this year, that transaction was preempted on Friday. In an all-cash $6.3 billion deal, parts of both companies were absorbed by Apollo Global Management. IGT’s gaming and digital businesses will be sold to Apollo as part of the accord.
They will all be rolled into “a newly formed holding company owned by funds managed by affiliates of Apollo,” according to the latter. This supersedes a February 29 merger agreement between Everi and IGT. Now, “IGT Gaming and Everi will be privately owned companies that are part of one combined enterprise.”
Stockholders of Everi will receive $14.25 per share, a 56 percent premium on the stock’s July 25 closing price. IGT gets $4.05 billion for IGT Gaming, most of which is expected to go back to shareholders in the form of dividends or to retire debt.
What remains of IGT will re-form as a lottery-only business, under a new name and stock-ticker symbol. IGT and Everi have until the end of September 2025 to execute their new merger.
Both a special committee of IGT and the board of Everi unanimously recommended the Apollo deal. IGT CEO Vince Sandusky will remain with the lottery-refocused IGT following the execution of the sale. Vice President for Strategy & Corporate Development Fabio Celadon moves up to CFO of the new enterprise, to be headquartered in Las Vegas.
IGT still plans to hold its second-quarter-earnings call, slated for July 30. Everi’s call, previously slated for August 9, has been scrapped.
Said Everi CEO Randy Taylor, “We believe this transaction maintains the integrity and strong strategic rationale of our original agreement with IGT, but now also provides significant and certain value to our stockholders as we move forward with the Apollo Funds as our partner. … Under private ownership, we believe we will be better positioned to accelerate the integration of our two organizations for the benefit of our customers and employees.”
Added IGT’s Sadusky, “With the Apollo Funds, we have found a partner that recognizes the strength of IGT Gaming, the value of our talent, and our position in the industry. This transaction will allow IGT Gaming to continue to invest in and enhance its growing core segments, while providing customers with a more comprehensive portfolio of offerings.”
He added, “IGT’s shareholders will continue to own one hundred percent of IGT’s Global Lottery business, which will be positioned for long-term success as a pure-play global-lottery player with a more focused, compelling business model and optimized capital structure to drive long-term shareholder value.”
Chimed in Apollo partner Daniel Cohen, “As an active investor in the gaming and leisure sector for many years, we have long admired both companies and their highly talented teams. We strongly believe in the value proposition of the combination and are confident these complementary gaming platforms will be even better positioned under private ownership to capture the opportunities ahead to grow and create value.
Jefferies Equity Research analyst David Katz opined that Friday’s agreement “validates our pre-deal views on EVRI, which had been $13-$15, and establishes a solid valuation for IGT. Our view has been that the combination bears strategic rationale and prospective long-term value expansion, with the time to closing and execution being the key barrier. Presuming the deal results in a better price and more efficient time to close, we view it as positive for both names.”
Allowing that there was much to consider, Katz said that it appeared to be a superior transaction to the February merger. He explained that it valued Everi at 5.3 times cash flow, compared to 4.4 times back on Leap Day, a valuation that had drifted down to 4.1 at times.
He continued, “The strategic rationale remains that the scale benefits in R&D and operations have proven beneficial in a low-growth, capital-intensive, hit-driven industry. … The product development cycle is long and the integration of the businesses could take time, which could be beneficially accomplished in private.”
Katz further noted that IGT’s lottery business was likely to be a clear revenue and strategy runway. He also believed it would lead to an improved valuation for IGT.
In his own Friday-afternoon investor note, Truist Securities analyst Barry Jonas said the Apollo revelation “is a surprise likely spurred by public markets not attributing much credit to either company for some time now.” He elaborated, “While we were optimistic around the longer-term potential of the combined entity (and heard positive feedback from operators), we were cautious about the near-term setup until the deal closed and possibly into early integration.”
Jonas had downgraded both IGT and Everi from Buy to Hold and both stocks had sold off “meaningfully” since February 29, “frustrating both shareholders and management.”
He observed that Apollo already had manufacturing-sector experience through its investment in AGS and had been previously tipped as a buyer for IGT. “It will be interesting to see if Apollo maintains the current strategic direction previously articulated for the IGT Gaming/EVRI combination, or looks to add/divest anything via M&A,” he wrote.
The analyst observed that Apollo had simultaneously purchased a United Kingdom-based delivery company called Evri, “which served to confuse some U.S. gaming investors.”
