Slot machine maker International Game Technology eyes sale

Flamingo Hotel, Las Vegas
Source: Flamingo Hotel Las Vegas | Twitter
Flamingo Hotel, Las Vegas

International Game Technology, the Las Vegas-based slot machine maker, has hired Morgan Stanley to explore a sale as the gaming industry pursues consolidation to combat slow growth, people familiar with the matter said on Monday.

IGT, which has a market capitalization of more than $3 billion, has been working on a sale for more than two months and has attracted interest from other gaming companies as well as private equity firms, the people said.

News of the sale process sent the stock soaring more than 14 percent to about $15 in Monday afternoon trading, giving the company a market value of more than $3.5 billion.

The gaming technology company is hosting management presentations for prospective buyers at this time, said the people, who asked not to be named because the matter is not public. Representatives of IGT and Morgan Stanley declined to comment.

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IGT has decided to seek a buyer because the company's stock had lost 31 percent of its value due to slow fundamentals in the gaming market. Uncertainty around the declining value of the company could spoil some bidders' appetite for the gaming equipment maker, some people cautioned.

The sale process could also be challenged because of lengthy regulatory approvals needed in gaming mergers. A deal could take more than a year to consummate due to a maze of international approvals, according to several people familiar with the matter.

A potential sale of IGT would follow several deals involving slot machine makers in the past year.

Last year, Bally Technologies purchased gaming equipment provider SHFL entertainment for $1.3 billion, while lottery giant Scientific Games purchased slot machine maker WMS Industries for $1.5 billion.

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Some potential buyers could face antitrust hurdles in pursuing IGT as a result of the consolidation that has already occurred. Gaming equipment makers such as Austrailia's Aristocrat Leisure Limited, Japan's Sega Sammy Holdings and KonamiCorp, and U.S.-based Bally Technologies already have a large presence in slot machines.

Private equity firms, meanwhile, could face a financing challenge stemming from a likely lengthy regulatory review, as banks funding a leveraged buyout would not be able to indefinitely hold funds aside for a deal.

A potential private equity buyer may have to fund a deal ahead of the closing, and using the capital before a deal closes would increase the private equity firms' cost of doing the deal, the people said.

— By Reuters

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