LAS VEGAS, Nevada -- (PRESS RELEASE) -- International Game Technology (IGT), today announced that it has entered into a definitive merger agreement with GTECH S.p.A. for the acquisition of IGT by GTECH for $6.4 billion, comprised of $4.7 billion in cash and stock and the assumption of $1.7 billion in net debt.
The transaction will create the world's leading end-to-end gaming company, uniquely positioned to capitalize on opportunities in global gaming market segments. The new company combines best-in-class content, operator capabilities, and interactive solutions, joining IGT's leading game library and manufacturing and operating capabilities with GTECH's gaming operations, lottery technology and services. The merger drives competitive scale across multiple businesses, geographies and product lines and is expected to achieve over $280 million in synergies.
Under the terms of the transaction, IGT and GTECH will combine under a newly formed holding company organized in the United Kingdom (NewCo). IGT shareholders will receive an aggregate value of $18.25 per IGT share in a combination of $13.69 in cash plus 0.1819 ordinary shares of NewCo for each share of IGT common stock, as described in greater detail below. GTECH shareholders will exchange each of their existing GTECH shares for one (1) newly issued NewCo share.
"We are extremely pleased to reach a definitive merger agreement with GTECH as a result of our exploration of strategic alternatives to increase shareholder value. This outstanding combination of two global leaders redefines the future of the gaming industry. Together we are uniquely positioned to provide the industry's broadest and most innovative portfolio of best-in-class products, solutions and services," said Patti Hart, IGT CEO. "This strategic agreement positions us to further transform the industry while providing meaningful benefit and value to our customers, our employees and our shareholders."
Commenting on the transaction, Marco Sala, GTECH S.p.A. CEO said, "This transaction is transformational for our business. With limited overlap in products and customers, the combined company will enjoy leading positions across all segments of the gaming landscape. It will increase our global scale and with a full suite of offerings and robust customer relationships across the client spectrum, the new company will be uniquely positioned to take advantage of the ongoing convergence across global gaming market segments. Our expertise across these segments and greater ability to invest in R&D will improve player experiences and benefit our government and business clients. The transaction will significantly enhance our cash flow and financial strength, and provide clear and achievable cost and revenue synergies."
The transaction has been unanimously approved by the boards of directors of both companies and represents a 46% premium to the closing price of IGT's common stock on June 6, 2014, the last trading day prior to initial reports that IGT was exploring a potential sale.
The combined entity would have over $6 billion in revenues and over $2 billion in EBITDA based on the last twelve trailing months ("LTM") as of March 31, 2014, assuming a USD/EUR exchange rate of 1.36.1
Additional Transaction Details
The transaction will include an election mechanism for IGT shareholders to elect all-stock, all-cash, or mixed consideration subject to proration in accordance with the terms of the merger agreement. Under certain circumstances, the stock component of the consideration may be received on a tax-deferred basis.
Assuming a mixed consideration election, the stock consideration portion is subject to adjustment with a 15% up and down collar based on the trading price of GTECH shares prior to the closing of the transaction. The exchange ratio of IGT common stock for NewCo stock will be determined by the average of the volume-weighted average price of GTECH stock (converted to USD) on ten randomly selected trading days occurring within the twenty trading-day period ending on (and including) the second full trading day prior to the closing of the transaction (the "GTECH Share Trading Price"). If the GTECH Share Trading Price is between or equal to $25.08 and $28.84, the exchange ratio will vary between 0.1819x and 0.1582x. Above $28.84, the exchange ratio will be fixed at 0.1582x. Between or equal to $21.32 and $25.08, IGT shareholders will receive NewCo stock at a fixed ratio of 0.1819x plus additional cash consideration up to $0.68 per IGT share. Below $21.32 IGT shareholders receive 0.1819 NewCo shares and additional cash consideration equal to the GTECH Share Trading Price multiplied by 0.0321.
NewCo will have its corporate headquarters in the United Kingdom and maintain operating headquarters in each of Las Vegas, Providence and Rome. NewCo will apply for listing solely on the New York Stock Exchange (NYSE). IGT's shares will cease trading on the NYSE and GTECH's shares will cease trading on the Borsa Italiana. It is expected that NewCo will continue under the name GTECH plc.
De Agostini S.p.A. and its subsidiary DeA Partecipazioni S.p.A., holding in the aggregate approximately 59% of GTECH's outstanding shares, have entered into a support agreement with IGT pursuant to which they have agreed to vote in favor of the transaction.
As a result of the transaction, it is anticipated that existing IGT and GTECH shareholders will own approximately 20% and 80%, respectively, of NewCo ordinary shares and De Agostini is expected to hold approximately 47% of NewCo's outstanding ordinary shares2.
The transaction is currently expected to be completed in the first or second quarter of 2015. The transaction is subject to the receipt of required antitrust and gaming clearances, approval by the IGT and GTECH shareholders, and other customary conditions. GTECH expects to finance the cash portion of the consideration through a combination of cash on hand and new financing. In connection with entering into the transaction, GTECH has received binding commitments totaling $10.7 billion from Credit Suisse, Barclays and Citigroup to finance the transaction, including refinancing certain existing indebtedness.
Upon the closing of the transaction, the initial board of directors of NewCo will be comprised of 13 directors including Marco Sala, GTECH's Chief Executive Officer, who will serve as the Chief Executive Officer of NewCo; five directors to be appointed by IGT from IGT's existing board of directors, including Phil Satre, IGT's Chairman, who will serve as Chairman of NewCo, Patti Hart, IGT's current Chief Executive Officer, who will serve as a Vice-Chairman, and seven directors to be appointed by GTECH at least of four of whom will be independent and one of whom will serve as a Vice-Chairman. The NewCo Board will be compliant with the listing standards of the NYSE applicable to non-controlled domestic issuers.
In addition, NewCo will implement a loyalty share program that will offer all NewCo shareholders (at the closing of the transaction and thereafter) that hold their NewCo ordinary shares continuously for at least three years following the closing, the right to receive 0.9995 (non-transferable) special voting shares per NewCo ordinary share.
Morgan Stanley & Co. LLC is providing financial advice, and Sidley & Austin LLP and Allen & Overy LLP are acting as legal advisors to IGT. Credit Suisse is providing financial advice, and Wachtell, Lipton, Rosen & Katz, Clifford Chance LLP and Lombardi, Molinari Segni are serving as legal advisors to GTECH in connection with the transaction.
International Game Technology (IGT) is a global leader in casino gaming entertainment and continues to transform the industry by translating casino player experiences to social, mobile and interactive environments for markets around the world. IGT's acquisition of DoubleDown Interactive provides engaging social casino style entertainment to more than 6 million players monthly.
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