International Game Technology and Everi Holdings Inc. announced Thursday their entry into definitive agreements in which IGT will separate its global gaming and PlayDigital businesses by way of a taxable spin-off to IGT shareholders and then immediately combine the businesses with Everi.
IGT will receive $2.6 billion in cash, which will be funded with the proceeds of debt incurred by the combined company. IGT expects to allocate $2 billion to debt repayment with the remaining amount devoted to separation and divestiture expenses, tax leakage and general corporate purposes.
The deal values the combined businesses at $6.2 billion, which is based on $4 billion for the IGT businesses and an enterprise value for Everi of $2.2 billion.
The expected closing is set for late 2024 or early 2025 if the transaction clears regulators and Everi and IGT shareholders.
As per Reuters, Truist analyst Barry Jonas notes that the deal doesn’t assume a “huge premium” for either businesses but could set up over time for a gaming tech powerhouse.
“We do see some significant risks posed by the deal, however, including the lengthy regulatory approval process,” he said.
IGT shareholders are expected to own 54 percent at closing and Everi stockholders the balance. The combined company would have projected 2024 revenue of $2.7 billion and EBITDA of $1 billion.
The parties have identified $85 million of cost savings and opportunities for capital expenditure efficiencies. The combination is expect to generate $800 million of cash flow in the second year following the closing, including realized synergies.
Deutsche Bank and Macquarie Capital provided financing commitments of $3.7 billion plus a $500 million revolver. About $1 billion of the proceeds will be used to refinance Everi’s existing debt, the $2.6 billion will be distributed to IGT, as noted above, and the rest will be used to pay the combined company’s financing fees.
IGT’s financial advisors were Macquarie Capital, Deutsche Bank and Mediobanca. Its outside counsel was Sidley Austin, led by M&A partners Paul Choi and Scott Williams in Chicago and finance partners Sean Damm and Angela Fontana in Dallas. IGT also used White & Case and Wachtell, Lipton, Rosen & Katz.
Everi tapped Global Leisure Partners as its financial advisor and Houlihan Lokey provided a fairness opinion to Everi’s board. Pillsbury Winthrop Shaw Pittman was its outside counsel with a team led by corporate partners Christian Salaman and Drew Simon-Rooke in California.
IGT CEO Vince Sadusky will lead the combined company, which will be headquartered in Las Vegas. Everi CEO Randy Taylor will be a board member of the combination.
As previously announced, IGT’s board embarked on a review of strategic alternatives for the businesses as a way to unlock the intrinsic value of the assets, Marco Sala, IGT’s executive chair of the board, said in a statement.
“The transaction announced today is a key milestone in that process,” he said. “The transaction will combine two robust gaming platforms with complementary capabilities, geographic footprints and enhanced growth opportunities…resulting in a pure play global lottery business.”
The combined company will change its name to International Game Technology and trade on the New York Stock Exchange as IGT. IGT will change its name but continue to trade on the NYSE under a new ticker symbol.
Sidley’s team advising IGT also included Brent M. Steele, Sylonda E. Lang, Nicole Aiello Martinez, Cameron K. Woolley, Anna B. Choi, Spencer A. Lee, Robert C. Uhl (Dallas), Danielle N. Sismour, William Ladas, Jordan M. Lemoine, Scott A. Gregus, Juan Arendse, Matt Nelson and Lisa Holzman (M&A and private equity); a Dallas team of Reid McKinney and Mimi Mallory (global finance); Rachel D. Kleinberg, Suresh T. Advani, Oliver Currall, Nathan Enfield, and Pranith Mehta (tax); Mark L. Kaufmann, E. Kyle Barnett, and Tomide K. Owolabi (technology and life sciences transactions); Lauren A. Gallagher, Karim S. Pirani, and Ryan B. McLeod (employee benefits and executive compensation); and Teresa L. Reuter, Peter McCorkell, Emily M. Wajert, Alex Down, and Carolyn L. Ayaub (labor and employment).
Others included Adam M. Gross and Johnny G. Skumpija (capital markets); Elizabeth K. McCloy, Will Otter, and Evan S. Turcotte (real estate); David E. Teitelbaum, Kerry Nilsen, and Jordyn R. Singer (banking and financial services); Colleen Theresa Brown, Francesca Blythe, Denise Kara, Stephen W. McInerney, and Sasha Hondagneu-Messner (privacy and cybersecurity); James P. Mooney (commercial litigation and disputes); Sven De Knop, Maryanne W. Kamau, Kayla M. Scott, and Nina Spieler (global arbitration, trade and advocacy); Heather M. Palmer (Houston) and Sarah A. Jehl (environmental); Vincent Brophy, William Blumenthal, Rosanna Connolly, Jamie M. Sadler, and Alex Harper (antitrust and competition); and Christine Duque (corporate governance).
The Pillsbury team counseling Everi also was made up of corporate partners Nick Burgess and Alexandra Calcado, special counsel Danielle de Zorzi, counsel Brandon Eckford and Christian Holbrook, senior associate Jeong Choi and associates Jon Schreiber, Kristin Garr, Kate Chan, Daniela Guerra and Grace Lee; intellectual property partners David Jakopin and Steven Farmer, special counsel Paul Thomas, counsel Scott Morton and associate Mark Booth; global sourcing & technology transactions partner Mario Dottori and associates Gabby Torres and Gabby Regard; real estate partner William Waller, senior associate Brittany Griffith and associate David Wright; and executive compensation & benefits partner Laura McDaniels and associates Jennifer Wong and Jad Gabriel Elchahal.
Others included tax partners Julie Divola and Nora Burke; finance partners Joseph Fastiggi and Philip Tendler and senior associate Daniel Welch; securities litigation & enforcement partner Bruce Ericson; international trade partner Matthew Rabinowitz and senior associate Zachary Rozen; employment law special counsel Andrea Milano; capital markets partner Davina Kaile; litigation partner Alex Lathrop, attorney Evan Storm and counsel Michael Andres Warley; antitrust & competition partner Michael Sibarium; cybersecurity, data protection & privacy senior counsel Catherine Meyer; and regulatory associates Arielle Heffez and Iris Karaman.