IGT to separate its lottery and gaming divisions, merge

International Game Technology grabbed headlines on Thursday with the company confirming in an official press statement that it would be splitting its lottery and gaming divisions. The move will see the Global Gaming and PlayDigital units, which deal with gaming platforms, sports betting, and iGaming content and products merge into Everi Holdings, creating a business worth at least $6.2bn, including debt.

IGT shareholders should end up controlling 54% of the combined company, the firm said in the statement, although this number is still an estimate. Meanwhile, Everi shareholders should make up the rest of the stock, or approximately 46%. The decision does not entirely surprise, as confirmed by IGT Executive Chair of the Board Marco Sala who showed a desire to boost the intrinsic value of the company:

"As previously announced, IGT's Board of Directors embarked on a review of strategic alternatives for our Global Gaming and PlayDigital businesses as a way to unlock the intrinsic value of our portfolio of industry-leading assets."

In the meantime, IGT will focus on lottery operations solely, which already contribute to half of the business’ revenue. The move has been prompted by a desire to demonstrate the company’s "true valuation" by ensuring that stock markets are aware of the underpinning value of the company’s shares, which have been underestimated, IGT believes.

To change that, the company is now enacting a shake-up that should allow it to reach its goal in mind sooner. IGT is concerned that it may be falling behind competitors who are trading at 11 times their estimated core earnings for 2025. IGT in contrast is only trading at 5 times that.

IGT CEO Vince Sadusky has been similarly excited about the new opportunity presented by this strategic move. He said that the resulting deal would see two businesses with complementary strengths work closer together as a result and create a new behemoth ready to tackle segments such as commercial gaming, iGaming, fintech, and sports betting.

"The creation of separate gaming and lottery companies, each with experienced management teams and simplified business models, better positions each company to service customers and create significant value for stakeholders," Sadusky explained.

Everi Executive Chairman Michael Rumbolz was similarly pleased with the development, arguing that the merger would have a transformational impact on business and significantly strengthen his company’s own expertise and expand its business horizons.

There will be some changes in the listing names of the two companies as well. For one, the deal is expected to close out either later this year, or in early 2025 at the outside. Once this is complete, subject to the customary regulatory approvals, the combined behemoth will change its name to International Game Technology and trade on the New York Stock Exchange under the IGT ticker.

However, the original IGT will change its own ticker to focus fully on the lottery business, trade separately, and also stay on the New York Stock Exchange. Although IGT is pulling the trigger on an ambitious deal, there are pitfalls, not least of which is a lengthy regulatory process. Cost savings, however, may reach $85m.

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