By Ananta Agarwal
(Reuters) -International Game Technology is splitting its lottery unit from its gaming businesses, which will be merged with casino platform provider Everi Holdings (NYSE:EVRI) to form a separate entity valued at $6.2 billion including debt.
The deal follows a strategic review of the two units, Global Gaming and PlayDigital, that offer gaming systems, iGaming and sports betting, and will let the standalone business focus on its lottery operations, which account for more than half its revenue.
IGT's management had said before that the intrinsic value of its businesses was not fully reflected in its stock price, prompting it to consider strategic options.
The company trades at five times its 2025 estimated core earnings, compared with its lottery rivals, which trade at 11 times, according to a note from Truist Securities.
IGT shareholders are expected to own about 54% of the combined company, with Everi stockholders holding the rest. The businesses will be separated by way of a taxable spin-off to IGT shareholders and then merged with Everi, the company said.
Everi caters to both land-based and digital casinos by providing gaming content, machines and services.
"The deal doesn't assume a huge premium for either businesses but could setup over time for a gaming tech powerhouse," said Truist analyst Barry Jonas in a research note.
After the deal closure, expected in late 2024 or early 2025 subject to regulatory approvals, the combined company will change its name to International Game Technology (NYSE:IGT) and trade on the New York Stock Exchange as IGT.
IGT will change its name and continue to trade on the NYSE under a new ticker symbol.
IGT CEO Vince Sadusky will lead the combined Las Vegas-based company, while the lottery business will be led by a new CEO.
"We do see some significant risks posed by the deal however, including the lengthy regulatory approval process," Truist's Jonas said.
The deal is expected to yield cost savings of about $85 million, with a projected pro-forma 2024 revenue of $2.7 billion, according to IGT.