Nevada board gives initial approval to IGT-Everi megadeal
Final regulatory approval is expected to be considered by the Nevada Gaming Commission on June 26. Apollo officials said final approval from the last regulator, the Pennsylvania Gaming Control Board, also is scheduled June 26 and the deal is expected to close July 1. Apollo is backing the deal with the resources of $20 billion in committed funds. Apollo managing member Daniel Cohen explained details of the transaction in a 90-minute presentation.
The last Nevada Gaming Control Board meeting under Chairman Kirk Hendrick’s tenure opened on Wednesday with a complex and lengthy regulatory review – and initial approval – of a corporate merger that could reshape the gaming supplier landscape.
Representatives from Apollo Global Management, International Game Technology and Everi Holdings went before the board to discuss Apollo’s $6.3 billion double acquisition of the two suppliers. This included numerous items related to ownership transfers, corporate protocols and compliance.
Nick Khin, who currently serves as president of IGT, also appeared for suitability approval as interim CEO of the new entity. Former Aristocrat Gaming CEO Hector Fernandez will assume the role later this year upon completion of a non-compete obligation.
The complex merger is still ongoing and will continue as Apollo navigates regulatory requirements in Nevada and elsewhere. But the state is the biggest in terms of influence and importance, as the new merged entity will be headquartered there. It was initially announced last July, but Wednesday was the first time officials gave new details about the transaction.
Ultimately, the board approved all the items unanimously, a significant step for one of the biggest industry deals in recent history. The Nevada Gaming Commission will now make a final ruling at its meeting on 26 June.
A growing gaming portfolio
Apollo is merging IGT’s gaming business with Everi’s gaming and financial technology business. The new entity will be taken private while retaining the IGT name. IGT’s sizeable lottery business is being spun off into its own publicly traded company under a different brand.
The firm has increasingly invested in the gaming industry over the last 20 years. This includes an ownership stint of supplier PlayAGS and current ownership of the Venetian-Palazzo casino on the Las Vegas Strip. New York-based Apollo paid $6.25 billion for the casino in 2022, nearly identical to that of the IGT-Everi acquisition.
Apollo partner Daniel Cohen went before the board to discuss the merger alongside attorney J Brin Gibson, who also notably served as chairman of the NGCB prior to Hendrick. Cohen asserted that his firm’s “sole focus is really to drive long-term value creation”, citing the success of its previous investments in the space.
“Our goal long term is to become the operator’s supplier,” Cohen told the board. “So if you’re the Venetian or Caesars or anyone else, you can come to IGT for basically every one of your product needs, which will allow us to continue to invest in products and innovate with our customers to really create the next generation of what casino technology products will look like.”
Closing the gap
IGT, one of the most storied brands in gaming, has seen two formidable competitors emerge over the years in Aristocrat and Light & Wonder. Aristocrat, by most accounts, has long held the top spot and L&W has been on a multi-year hot streak since divesting its own lottery and sports betting divisions. IGT could be considered third among them, with a widening gap.
Cohen acknowledged this on Wednesday, saying that the combined business “has a margin profile that is significantly lower than our largest peers, which, you obviously know, are Light & Wonder and Aristocrat”. He said Apollo will “look to close that gap under our ownership”.
On Monday, Fitch Ratings maintained Everi’s “BB-” long-term default rating and said it expects the new entity to perform well. Additionally, the agency said that the combined slot machine base of nearly 70,000 units would already eclipse both Aristocrat and L&W.
The merger, Fitch said, “should enable more cross-selling opportunities between the two entities”.
The ole switcharoo
The Apollo deal is unusual in that two companies are being acquired and merged by a third party. But what makes it even more unusual is that IGT and Everi had already agreed to merge on their own some four months earlier.
State regulators had begun work related to the first agreement when the change was made, board members said on Wednesday. Hendrick jokingly referred to it as a “hold my jacket” scenario, with Apollo jumping into the mix at the last minute.
Several changes were made between the original deal and the eventual Apollo agreement. The most notable was the leadership, as current IGT CEO Vince Sadusky was originally slated to lead the newly combined business. Everi Chairman Mike Rumbolz was supposed to chair the new board. Instead, Sadusky is leaving to become CEO of IGT’s spun-off lottery business, while there has been no mention of a new role for Rumbolz.
Cohen said that Apollo had made multiple offers to IGT specifically starting in 2014. When the first merger was announced, the firm felt that it could better unlock quicker cash value for shareholders of both companies. And of course, it represented a rare opportunity to make a significant investment in a sector where Apollo has experience.
“We were able to come to a transaction that effectively just turned the stock consideration both shareholders were going to receive into cash,” Cohen explained. “So all the shareholders at both companies didn’t necessarily need to take the risks of execution and integrating the companies…. We will undertake that effort.”
Misplaced anger?
One of the stranger interactions at the hearing came from board member George Assad, who ranted about the string of AML violations the state has seen this year. At one point Assad said that the most important lesson was to “keep the marketing team the hell out” of compliance matters. This was a reference to the push and pull of attracting high-value customers while balancing obvious AML risks.
Despite the fact that all of the violations have come from casino operators and not suppliers, Assad grilled officials on their compliance efforts.
Everi Chief Legal Officer Kate Lowenhar-Fisher explained that both compliance staffs are still in place for the time being. They will be merged later into a single unit, although Lowenhar-Fisher acknowledged board guidance would be needed for this.
“I think we’re going to learn a lot from each other,” she assured Assad.
In order to close the transaction by 1 July, Apollo needs eight more jurisdiction approvals, she said. Aside from Nevada, which is not technically finalised until the commission signs off, the other most important locale is Pennsylvania later this month. Overall, she said, the company expects to receive all approvals in that time frame.
A board in flux
As mentioned, Hendrick will now step down as NGCB chair, handing the reins to former Gaming Arts CEO Mike Dreitzer.
Numerous speakers on Wednesday praised Hendrick for his tenure, although it was supposed to run through January 2027. Gibson was among the supporters, but he also stepped down in 2022 before the end of his term. When Dreitzer takes over on 23 June, he will become the fifth board chair since January 2019.
So far this year, the board has issued multimillion-dollar AML fines to Resorts World, MGM Resorts and Wynn Resorts. A fourth investigation in process involving the Fontainebleau was inadvertently leaked at last month’s commission meeting.
Many have called the recent era perhaps the bleakest regulatory period in state history, especially for the “gold standard” US gaming market. This has been made worse by the fact that the three investigations that led to fines were unearthed by federal authorities, not state regulators. Stakeholders are hopeful that Dreitzer, as a longtime veteran of the industry, can lend a fresh perspective to one of gaming’s most crucial bodies.
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