IGT shareholders will receive a total of $18.25 per share in a combination of $13.69 in cash and 0.1819 ordinary share of the new company, representing an 18 percent premium to IGT's closing price on Tuesday.
Reuters reported last month that IGT had hired Morgan Stanley to explore a sale as the gaming industry pursues consolidation to combat slowing growth.
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IGT and GTECH will combine under a newly formed holding company, which will be based in the United Kingdom. The new company will apply for listing solely on the New York Stock Exchange.
"With limited overlap in products and customers, the combined company will enjoy leading positions across all segments of the gaming landscape," said GTECH Chief Executive Officer Marco Sala, who will become the CEO of the new company.
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GTECH said it expects to finance the cash portion of the deal through a combination of cash on hand and new financing. The company has received binding commitments of $10.7 billion from Credit Suisse, Barclays and Citigroup to finance the deal.
Credit Suisse, Barclays and Citigroup are the financial advisers to GTECH, while Wachtell, Lipton, Rosen & Katz, Clifford Chance LLP and Lombardi Molinari Segni are the legal advisers.
Morgan Stanley is providing financial advice, and Sidley & Austin LLP and Allen & Overy are acting as legal advisers to IGT.