Our math suggests IGT should trade at a little over $17 given the high probability of closing and low probability of a competing bid
"CEO's Dream Strategic Transaction" and joining forces with "a tough competitor" - Patti Hart
IGT and it's management team catches a golden parachute while positioning the NewCo for a broader, deeper global platform
• Creates world leading end-to-end gaming company across all segments
‒ #1 global gaming equipment supplier
‒ #1 global lottery business
‒ Top tier in social gaming and interactive wagering
• Enhanced global scale with diversified product portfolio and geographic mix
• Greater resources allow further strengthening of industry-leading R&D effort
• Uniquely positioned to exploit key market trends
• Industry leader with more than $6B in revenues and $2B in EBITDA
• $13.69 in cash plus 0.1819x GTECH shares, equivalent to $18.25 per IGT common share (75% cash and 25% stock)
• NewCo will incorporate in the UK and UK tax resident
• NewCo will be NYSE listed, 80% owned by GTECH & 20% IGT
• Synergies: $280 million expected over 3 years
• Lottery Operations
• Video Lotteries
Pro Forma Revenue Mix (based on 2013):
• 51% Gaming Equipment'
• 35% Lotteries
• 8% Interactive
• 6% Other
Geographic Revenue Mix:
• 46% US and Canada
• 36% Italy
• 18% International
- Process & Roadblocks: goal was to create strategic value for shareholders, no other transaction more strategic! No anti-trust issues. "CEO's Dream Strategic Transaction"
- Cost savings of $280 million are incremental to previously announced cost savings transactions
- Break-up fee: not disclosed today, but standard break up fee.
- Discussion timeline: talks moved from partnering to tying the know, positive relationship....was a full process and evaluated all possibilities and outcomes, this is the highest value creation for IGT shareholders.
- Participation business: no significant shift from historical, but opportunity to bring size, scale, and geographic diversity.
- Industry needed consolidation to remove excess costs.
- Believe industry can be stronger and IGT (NewCo) can be stronger with fewer suppliers.
- EGM not expect unusual rescission elections.
- Regulatory concerns: looking at 9-12 months, shooting for front-end, earlier - need to license in a few additional jurisdictions, go thru anti-trust, two Board and shareholder meetings.
- UK domicile: GTECH had requirement to be in the EU, also believe UK is a "fantastic" market to facilitate US-listing, English speaking, slight tax advantages.
- UK tax advantage: 100-300 bps advantage, but not the driving decision rather strategic advantages drove decision
- Game Ops - industry needs to innovate; size and scale will afford this innovation advancement
- GTECH licensing: a small number, no jurisdiction would appear to pose a risk to the transaction
- Additional industry consolidation required? No such thing as a pure gaming, slot machine supplier anymore. More of a "distributed gaming" world.
- Merger rationale: Reduce vulnerability and add strengths