International Game Technology’s linchpin, its contract for the Italian lottery, has been renewed. The company disclosed the news May 19.
Renewal comes at a cost. IGT had to bid $2.6 billion to retain its lottery business. There will be two upfront payments in 2025, of €500 million ($562 million) and €300 million ($338 million), respectively. The $1.7 billion balance is due in 2026.
However, observed Jefferies Equity Research analyst David Katz, “Given IGT’s long tenure with the contract, an aggressive bid should not be surprising.”
Katz’s comment came as part of a May 19 investor note. He also remarked that the bid would slightly dampen the financial effect of IGT’s sale of its non-lottery assets to Apollo Management.
The IGT lottery business in Italy is done through a consortium that includes Allwyn, Arianna 2001, and Novomatic. IGT holds a 61.5 percent stake in that joint venture.
While closing out its slot machine business, Katz noted, “IGT expects to expand the business in igaming, sports betting, ilottery and other digital businesses. We believe the outcome for IGT appears to be a modest positive, from the perspective that retaining the contract was critical for the company and its shares given it has been the operator for more than 30 years and post the spin of its Gaming business, global Lottery leadership is its core and only business.”
While Katz expected double-digit movement in IGT’s share price, he was taken aback by the size of the bid, writing that it militated against double-digit increases of price. IGT was, he noted, expecting $4 billion from the Apollo sale and spinoff, and “our assumption is that this bid reduces the prospective capital return opportunity.”
