IGT Stock Dips After Company Pays $2.6 Billion to Renew Italian Lottery Deal
Posted on: May 19, 2025, 11:32h.
Last updated on: May 19, 2025, 12:40h.
- There’s some talk that IGT overpaid to renew an important contract
- Analysts say overhang on stock has been removed
In premarket trading, the stock appeared poised for a Monday rally on news that it renewed its Italian lottery contract, but International Game Technology (NYSE: IGT) is pointed lower in late morning trading as analysts speculate the company may have overpaid to secure that deal.
A consortium comprised of Allwyn, Arianna 2001, and Novomatic Italia and led by IGT retained what IGT Chairman Marco Sala described as “one of the world’s most important lottery contracts,” locking it up for nine years at a cost of $2.6 billion. That’s a heftier price than Wall Street was expecting and includes 2025 payments of $558.26 million and $335 million, with the balance due next year.
Based on Lotto’s current €400M annual earnings before interest, taxes, depreciation, and amortization (EBITDA) run rate, we think this moves the 9 year IRR to the 10-15% range, more than half below our estimate for the prior contract IRR,” observes Truist Securities analyst Barry Jonas. “Still, an expansion into more digital gaming as teased in today’s release (no doubt a focus for tomorrow’s call) could potentially yield higher returns.”
IGT has held the rights to operate Italy’s lottery for more than three decades and there was belief in the investment community that the specter of potentially losing the contract was one reason why the stock shed 20.41% over the past year.
Italian Lottery News Mostly Positive for IGT Stock, but …
Although the $2.6 billion IGT is paying to Agenzia delle Dogane e dei Monopoli (ADM) is more than analysts expected, getting the deal out of the way and secured for nearly a decade is mostly positive, and paves the way for the operator to grow its footprint in the Eurozone’s third-largest economy.
CEO Vince Sadusky said IGT plans to boost its internet lottery sales in Italy while potentially parlaying that effort into a larger presence in the country’s consumer-facing iGaming and sports wagering segments, “and other digital gaming business.”
Still, analysts worry that with the larger-than-expected price tag for the Italian lottery accord, IGT’s ability to return capital to investors after the company merges its global gaming and PlayDigital with Everi and Apollo Global Management could be affected.
“The magnitude of the bid price likely exceeds most expectations and therefore mitigates the upside reaction,” wrote Jefferies analyst David Katz in a note to clients on Monday. “Note that post the completion of the gaming business later in 2025, Management indicated it would use the $4B+ proceeds to reduce debt and return capital, and our assumption is that this bid reduces the prospective capital return opportunity.”
Flutter Will Be Fine
Flutter Entertainment (NYSE: FLUT) was IGT’s competition for the Italian lottery deal. In 2022, Flutter paid $2.2 billion for Italian lottery giant Sisal and is in the process of buying Snaitech, confirming it has a significant footprint in Italy.
Despite missing out on the Italian lottery contract, there’s likely limited longer-ranging impact to shares of the FanDuel parent.
“We don’t see any major negative read for FLUT in the loss of Italian Lotto to IGT as our view on FLUT owning Lotto at all costs was mixed. We have always seen traditional Lotto as a lower multiple business (~5.5x historical multiple) somewhat straying from FLUT’s core Digital focus,” adds Jonas.
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