IGT Shares Soar Amid Reports of Apollo Considering Acquisition of Its Gaming Division
Today, International Game Technology (IGT) shares experienced a significant increase in value following reports that Apollo Global Management (AGM) is thinking about acquiring IGT's global gaming division. These shares ascended by approximately 10.45% and surpassed their daily average trading volume by more than triplication. Consequently, since the New Year, IGT's market value has grown by 46.38%.
The details of this potential transaction were not disclosed in a Bloomberg article who cited unnamed sources familiar with the situation. The reported potential range of sale value for the global gaming unit, which includes the slot machine business, is $4 billion to $5 billion, comprising debt. Considering IGT's total market cap of $6.02 billion at the end of today, such a sale would be a significant gain for the company.
The news comes amidst IGT's announcement in June of evaluating strategic alternatives for its global gaming and PlayDigital departments. IGT's statement indicated that no definitive timeframe had been set for these potential transactions; however, it implied that doing so would clarify the company's overall investment thesis, thus potentially making IGT's shares more appealing to a wider range of investors.
The lottery business, worth 75% of pro-forma earnings, displays notable profitability and plays a significant role in the company's EBITDA. Despite the lottery arm's prominence in the business's profitability, it remains undervalued when connected to a larger company like IGT. So, if IGT does end up shedding the global gaming and/or PlayDigital units, it may lead to a cleaner investment thesis and a more alluring stock price.
The specific parties interested in PlayDigital have not been mentioned. In June, IGT hinted at the possibility of retaining rather than selling these departments, though it also considered spinning them out.
The feasibility of Apollo's potential interest in IGT's global gaming unit is plausible, given their previous ownership of other gaming assets and their involvement in numerous gaming industry consolidation rumors. Additionally, even at the estimated $4 billion to $5 billion price point, a purchaser would receive IGT's slot machine unit at a lesser valuation compared to its rival, Aristocrat Leisure.
Apollo used to hold the largest stake in PlayAGS, another gaming company. Furthermore, the private equity giant operates the Venetian in Las Vegas, a famous casino resort. If the rumor holds true, Apollo would be a logical contender interested in IGT's global gaming unit, as it aligns with their current business interests.
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