* GTECH has entered preliminary talks to buy U.S. IGT
* Slot-machine maker has a market value of nearly $4 bln
* IGT deal positive for GTECH but hard to swallow -analysts
(Adds analysts comments, IGT statement)
By Francesca Landini
MILAN, June 16 Italian lottery operator GTECH
is in preliminary talks to buy Las Vegas-based
International Game Technology (IGT) in a cash and shares
deal that would make it a significant player in the casino slot
GTECH said on Monday it had hired advisers to help it
negotiate a deal, confirming what sources told Reuters last
week. It gave no value for the potential bid.
IGT decided to seek a buyer after its stock slid by almost a
third because of weak demand in the gaming market. Three rival
bidders plan to make formal offers alongside GTECH, according to
people familiar with the situation, but none have gone public
with their plans.
"This transaction could potentially involve the use of a mix
of cash and equity," GTECH said, adding it would not need to
sell new shares to raise the cash for the deal.
IGT shares rose almost 11 percent on Friday after the
Reuters report, giving it a market value of close to $4 billion.
The company had $2.2 billion of debt at the end of March,
giving it an enterprise value of around $6 billion.
Buying the U.S. company would help Rome-based GTECH increase
revenues from abroad and diversify its lottery management
business into casino slot-machines.
"GTECH's share in the slot-machine market is only around 1
percent at the moment," said an analyst at a brokerage based in
Analysts warned, however, that the U.S. company would be a
big acquisition for GTECH to digest.
"IGT is a very large prey for GTECH. This means it would
take years to integrate the new company," a second analyst said.
GTECH, known until recently as Lottomatica Group, is the
world's largest operator of lotteries, running Italy's Lotto
game and several U.S. state lotteries. It has a market
capitalization of around $4.64 billion.
Funding the acquisition partially by issuing new stock would
dilute existing shareholders, the first analyst said.
GTECH is roughly 60 percent owned by Italy's De Agostini
Group, which expanded its Lottomatica empire in 2006 with the
acquisition of U.S. gaming company GTECH.
At the end of 2013, the Rome-based company derived 60
percent of its revenues from Italy, with the rest coming from
businesses in the Americas and the rest of the world.
Shares in GTECH were down 2 percent at 19.25 euros at 1015
GMT, while the Milan benchmark index was down 0.6 percent.
People familiar with the matter told Reuters on Friday that
GTECH was competing with billionaire Ron Perelman's MacAndrews &
Forbes Holdings to acquire the U.S. company, which makes slot
machines bearing a variety of brands such as that of TV show
"Wheel of Fortune".
Private equity firm Apollo Global Management LLC, a
seasoned investor in the U.S. gaming sector, is also pursuing a
bid, as is buyout firm Carlyle Group LP, the people said.
The parties made preliminary takeover offers for IGT and are
preparing to submit binding bids in the next few weeks, they
"No decisions have been made by the board regarding any
particular alternative available to the company," IGT said on
Monday in response to the Reuters report.
(Editing by Sophie Walker and Tom Pfeiffer)