Combined Everi/IGT Will Be Bigger Than Aristocrat, Light & Wonder

• Assessment is based on installation base, not market value
• Transaction expected to close in a matter of weeks

When Apollo Global Management (NYSE: APO) puts the finishing touches on its $6.3 billion acquisition of Everi (NYSE: EVRI) and International Game Technology’s (NYSE: IGT) global gaming and PlayDigital units in the coming weeks, the result will be larger than the top slot machine manufacturers.

In a new report, Fitch Ratings noted that prior to the transaction closing, Everi and IGT have a combined 70K installed units, easily surpassing Light & Wonder’s (NASDAQ: LNW) 54,397. The research firm added the combined Everi/IGT slot entity will have slots sales market share in North America in excess of Aristocrat and Light & Wonder – the market leaders. Those may be among the reasons Apollo swooped in with a $6.3 billion offer for Everi and the two IGT businesses.

(Everi) Management estimates mid-single-digit revenue growth through 2026 based on current business plans,” according to Fitch. “Further growth potential includes distribution of Everi’s content into IGT’s existing networks, distribution of FinTech solutions in international and distributed gaming markets, and expansion of IGT game content into the Class II category.”

If the $6.3 billion Apollo is paying was assigned as the market capitalization of the merged Everi/IGT entity, it would be below the market values of both Aristocrat and Light & Wonder.

Everi/IGT Combination Likely to Produce Cost Savings

As is the case with many private equity acquisitions, Apollo is financing its purchase of Everi and the IGT businesses with debt — $4.3 billion to be precise — and some of it is junk-rated, meaning it carries higher interest rates.

That makes revenue growth and cost savings essential. It appears the combined slot machine maker will be able to deliver on the latter.

“(Everi) Management expects $140 million in run-rate cost synergies to be realized by the third year,” adds Fitch. “These enhancements have been identified through the impact of a larger scale on supply chain and cost optimization, streamlined operations, and real estate consolidation. Management expects further savings of $20 million to be realized in lower capex spending through synergies.”

The ratings agency pointed out that Everi had $77 million in cash on hand at the end of the first quarter and that the gaming device maker generated 2024 free cash flow of $162 million. The combined company will have higher leverage ratios than Aristocrat and Light & Wonder, according to Fitch.

Everi/IGT Will Have Diversified Revenue Streams

One advantage Apollo could wring from Everi/IGT is that the merged company will have a diverse revenue stream, perhaps more so than rivals Aristocrat and Light & Wonder.

Gaming operations and sales are forecast to combine for 52% of the combined company’s sales with systems and software contributing another 23% to the top line. Fintech and iGaming will combine for the remaining 25%.

“Further growth potential includes distribution of Everi’s content into IGT’s existing networks, distribution of FinTech solutions in international and distributed gaming markets, and expansion of IGT game content into the Class II category,” concludes Fitch.