The definitive agreement will see IGT sell Lottomatica Videolot Rete and Lottomatica Scommesse, with €725m to be paid upon closing. A further €100m will be payable on 31 December 2021, with the final €125m payable on 30 September 2022.
These deferred payments are not subject to any conditions other than closing, and are secured by an equity commitment letter from the Apollo-managed funds. IGT plans to use the proceeds to pay down net debt, it said.
“The transaction enables IGT to monetise its leadership positions in the Italian B2C gaming machine, sports betting, and digital spaces at an attractive multiple to comparable Italian transactions, providing us with enhanced financial flexibility,” IGT chief Marco Sala said.
“Aligning with our recent reorganisation, the favourable rebalancing of our business and geographic mix reframes and simplifies our priorities while improving the company’s future profit margin, cash flow generation, and debt profile.”
The transaction values the businesses to be sold at an enterprise value of approximately €1.1bn, having generated adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of €206.6m in 2019, and aggregated net income of €92.1m. In the supplier’s year-end results, the businesses are to be reported as discontinued operations.
IGT’s board of directors has unanimously approved the transaction, which remains subject to closing conditions including regulatory approvals, and is expected to close in the first half of 2021.
Credit Suisse International is serving as IGT’s lead financial advisor for the transaction, with UBS acting as financial and fairness opinion advisor, and White & Case and NCTM as general advisors.
Gamenet Group, meanwhile, is being advised by Mediobanca, Paul, Weiss, Rifkind, Wharton & Garrison, and the Italian offices of Cleary, Gottlieb, Steen & Hamilton and Latham & Watkins.
The deal follows IGT reporting a 14.9% year-on-year decline in third quarter revenue to $981.5m in November. Gains in its lottery operating unit were offset by the global gaming division, which has been badly affected by the novel coronavirus (Covid-19) pandemic, in the three months to 30 September.
It has since invested €500m in Sazka Group and the investment business behind the operator KKCG, and struck a CAD$3.3bn deal for Canadian casino business Great Canadian Gaming Corporation.
Shares in IGT closed up 3.38% at $12.53 per share in New York on Friday (4 December), down 10.82% over the past 12 months.