Blue jeans?!? Yes, you read that correctly. In this episode, Nick and Don speak with Nick Weaver, Co-Founder and COO of Blue Delta Jeans. Learn how Nick and his team are using $500 custom-tailored blue jeans to thrill slot players and breathe new life into VIP events and continuity programs. Also in this episode, the EVERI / IGT merger.



Howdy Don, how are things in your neck of the woods today?


Gorgeous today, it’s going to be 75 degrees and sunny. I think I’ve got to cut the grass, so it’s beautiful here.


Okay, well I’m just fresh out of the dentist chair, so that gives you a idea of my state of mind. Although I have to say we have the world’s nicest dentist, such a good guy, and amusingly kind of an interesting tick. He has this penchant for always asking open-ended questions. So you’re in the chair and it’s like, “So Nick, what do you have planned for the weekend?” [inaudible 00:00:39] Kind of an interesting tick.

Anyway, so the big news since our last episode, the EVERI IGT merger. So in addition to being the big news item, it’s also the topic of several listener questions that we received asking for our thoughts about the deal. So we’ll do a two birds with one stone approach today on the news and listener questions. So the deal top-level, here’s my understanding of it. So IGT is going to spin off an entity that owns its non-lottery and iGaming businesses. EVERI is then going to purchase 46% of that entity for roughly a hundred million shares of every common stock plus 2.6 billion in cash. Then post-transaction, IGT will own 54% of the combined entity and together with De Agostini, the Italian Publishing Group behind it all, they’re going to control nine of the 11 board seats.

So IGT will use the cash proceeds of the deal, that 2.6 billion to pay down debt, and that cash plus an incremental 1.1 billion in financing will become debt on the combined entities balance sheet. From a management perspective, EVERI’s current chairman Mike Rumbolz, will chair the combined entity with IGT’s current chief Vince Sadusky serving as the combined entities CEO. And once all the dust is settled, the combined entity will be renamed to International Game Technology Inc with EVERI’s name disappearing presumably, and it’ll trade on the NYSE under the ticker IGT. So the deal is obviously subject to regulatory approvals, so it’ll be a while before we see this all affected.

And on the synergy front, they project a few things. So first, the combination of the product portfolios is potentially quite interesting. On the one hand we’ll have the combined game output of each company in one bucket, and without question, there’s some potentially interesting crossover there with the iGaming and system side of IGT with EVERI’s fintech portfolio. And then secondly, EVERI is going to tap into that IGT global distribution network, which as we all know is absolutely immense. And then third, there are obviously a bunch of financial metrics that we don’t really need to discuss here. So that’s the quick and dirty of the deal mechanics. Hopefully I got it roughly right. And now we can address those listener questions regarding our thoughts about the deal and what it means for slot operations.

So Don, you and I spend a lot of time researching and discussing the economic fundamentals of slot floors and as we’ve said on too many occasions to count, the abundance and diversity of what we see in slot supply are by no means supported by what we see on the demand side. And as a refresher there, what we often see is around 10% of players generating upwards of 80% of the revenue. And then doing so through a very narrow band of product.

So as you’ve said many times you consistently see around 10% of titles on floor, essentially carrying the bulk of the operation. So my bottom line on this, when I look at the economic fundamentals, really two things. One, bravo. I have to say consolidation is definitely warranted and I feel this is a step in the right direction. And two, really I see this as kind of a harbinger of things to come. It wouldn’t surprise me again, just looking at those fundamentals to see two or three more of these deals coming down the pike in the next 12 to 24 months or so. So that’s really me. How about you, Don? From more of the operational perspective, how do these types of things and how’s this one sit with you?


It’s very interesting. It didn’t seem like a natural fit to me, but you’re looking at two of the best three in physical reels, although that’s maybe 10% of your purchases anymore. On the video front, IGT has been making some strides the last year and a half. Their cabinets are really well. EVERI just introduced a couple new cabinets, but they’ve been working off the Empire Flex for a while. So on the video side is where I’m most curious to see what’s going to happen.

You’ve got basically two new cabinets from EVERI, a couple of new cabinets from IGT. When will they obsolete them? When will they introduce new stuff? That’s the things I’m going to be most curious about and where they’re going to keep their talent at. So they both had really good success there for a while. Obviously IGT was the… They’re still the best in video poker. Their physical reels are doing really well. EVERI’s physical reels do really well get a great average bet, but they’re probably both obviously behind Aristocrat and Light & Wonder on the video side. And you’ve got a company like AGS has been coming on here recently too, and they’ve been doing really well on the video side. So where is the EvERI IGT going to slot in? That’s going to be my big question.


Yeah, and are you one of those that gets nervous when you see consolidation just in terms of what it means with leverage against suppliers and stuff?


Yeah, I really do. The casinos really need competition to keep prices down for one, and you see how

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