Still, the size and scope of the purchase and eventual merge of the 2 entities is somewhat astounding, a minimum of in comparison to the standard M&A activity that happens at the supplier side of the gaming business. GTECH will shell out a complete of $6.4 billion for IGT—$4.7 billion in cash and stock and the idea of $1.7 billion in outstanding IGT debt. Once the deal is approved by shareholders from both companies in addition to state and federal regulators, a process that some estimate could take so long as one year, IGT and GTECH will combine under a newly formed UK holding company (NewCo) with its corporate headquarters within the Uk and operating headquarters in Las Vegas, Providence, R.I., and Rome, Italy. NewCo may be led by a 13-member board of directors, with current IGT Chairman Phil Stare assuming the chairman position at NewCo and current IGT CEO Patti Hart serving as vice president. Marco Sala, the present CEO of GTECH, will function CEO of NewCo.
The combination of GTECH and IGT will create the world’s leading end?to?end gaming company, uniquely positioned to capitalize on opportunities across global gaming market segments in both the lottery and casino segments, in line with press materials. If current business models and exchange rates hold, the combined companies are projected to generate $6 billion in yearly revenue and $2 billion in EBITDA.
“This transaction is transformational for our business,” Sala said in a prepared statement. “With limited overlap in products and customers, the combined company will enjoy leading positions across all segments of the gaming landscape. It's going to increase our global scale and with an entire suite of offerings and strong customer relationships around the client spectrum, the brand new company could have unparalleled capabilities to handle the continuing convergence across global gaming segments. Our expertise across these segments and larger ability to speculate in R&D will improve player experiences and benefit our government and business clients. The transaction will significantly enhance our cash flow and monetary strength, and supply clear and achievable cost and revenue synergies.”
“This opportunity comes along once in a CEO’s lifetime,” Hart told the Las Vegas Review-Journal. “The ability to begin from scratch and create an organization with this strength is all concerning the perfect timing.”
The potential uptick in revenue will come as welcome news to IGT, which has suffered from its share of financial bad news of late. Bloomberg reports IGT’s share of North American slot machines sales, which amounted to 60 percent of the market in 2003, was all the way down to 41 percent in 2012. This year, IGT saw revenue decline 14.5 percent and earnings drop 66 percent for the quarter ended March 31, consistent with the Las Vegas Review-Journal, leading the corporate to scale back its global workforce by 7 percent to assist defray costs.
“Given the sluggish growth in its domestic market and the increased competition, it [the acquisition/merger] was probably the most productive decision for IGT,” Todd Eilers, founding father of Eilers Research told Bloomberg.
Indeed, the timing appears good of late for a lot of gaming suppliers, who, like GTECH, are pursuing a growth-through-acquisition strategy. The newest company to make a touch on this area was Aristocrat Technologies, which earlier in July announced the $1.28 billion purchase of Online game Technology, a Tennessee-based producer of sophistication II slot games and systems for the tribal gaming market with an installed base of roughly 20,200 leased machines.
“VGT has a complementary product offering and offers a novel opportunity to accelerate our growth within the US recurring revenue segment, which has for a while been a very powerful strategic objective of Aristocrat," said Jamie Odell, CEO and managing director for Aristocrat in a prepared statement. “This combination also offers exciting growth opportunities for VGT by leveraging premium Aristocrat games and systems products, in addition to national distribution opportunities for VGT's Class II products."
Aristocrat also announced the acquisition of Paltronics, an Illinois-based supplier of value-added applications for in-game media windows and bonusing applications for EGMs, video poker machines and table games, for an undisclosed sum of money. “This is a compelling acquisition so they can deliver significant value across key strategic segments, particularly our leading U.S. casino systems business and within the fast-growing linked progressive and jackpot markets,” Odell said.
Last year also saw its share of gaming supplier acquisition activity, headlines by Scientific Games’ $1.5 billion purchase of WMS Gaming, and the sale of SHFL entertainment to Bally Technologies for $1.3 billion.
Read More... [Source: Gaming Industry News]
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