In a megadeal that profoundly shakes up the gaming industry’s landscape, International Game Technology (IGT) has announced a colossal merger with Everi. This merging of giants orchestrates the harmonious union of IGT’s global gaming and PlayDigital units with Everi, a transaction valued at a staggering $6.2 billion. Making it one of the largest gaming industry transactions to transpire up till 2024.
Typically, mergers such as this emerge from a hunger for cost efficiencies or a desire to combine research and development initiatives. However, in the case of this particular IGT-Everi fusion, as illuminated by Truist analyst Barry Jonas, the aspiration is to acquire the scale pivotal for survival – and indeed, success – in the fiercely competitive realm of gaming devices.
Jonas’ observation is guided by his meetings with several slot machine manufacturers in Las Vegas. He underscored how both IGT and Everi have an acute understanding that synergy isn’t merely a mathematical equation where one plus one equals three. Their focus, according to Jonas, isn’t just about carving out cost synergies or conserving on R&D expenses. The necessity of scale in the arena of slot gaming and cabinet manufacturing, he says, is indispensable to maximizing opportunities or “shots on goal.”
As the merger unfolds, IGT investors will clutch onto a healthy majority – 54% – of the jointly formed company, leaving Everi shareholders with the remaining balance. The completion of this transaction is slated for late-2024 or early next year.
Despite their assertion that cost savings isn’t the driving force of their merger, Jonas points out that the management expects a sizable $75 million in cost synergies. Moreover, they anticipate another boon: the enhancement of their slot scale and financial technology expertise, alongside stronger exposure to iGaming and sports betting under one consolidated, vertically integrated banner. This development could stimulate revenue generation, potentially making the merged entity a $2.7 billion sales beast as early as this year.
The transaction promises a symbiotic relationship that amalgamates Everi’s stronghold in Class II gaming devices within areas where IGT’s influence isn’t as commanding, with IGT’s supremacy in Class III machines. The management anticipates this promising union to be particularly appealing to casino operators keen to turn to a single, comprehensive entity for their fintech expansion and slot procurement needs.
Drawing some potential clouds over the otherwise bright merger horizon, Jonas notes, is IGT’s association with lottery operations. Looking beyond the assurance that the merger would enhance the lottery unit, turning it into a “premier pure play,” a concerning factor is the possible surge in MegaMillions ticket prices. Management, although refraining from commenting directly on these speculations, did point out the possibility of significant ramifications for IGT. This concern arises from the fact that lottery operations form a substantial three-quarters of IGT’s pro forma earnings. As the gaming industry watches with bated breath, only time will unfurl the true impacts this monumental merger will have.
