Apollo Global Management’s $6.3 billion acquisition of Everi and International Game Technology’s (IGT) global gaming and PlayDigital units is set to reshape the competitive landscape of the slot machine manufacturing industry. This transformative deal positions the combined entity to surpass industry giants such as Aristocrat and Light & Wonder in terms of installed base, though not market value. The transaction is anticipated to conclude within weeks, heralding a new era for slot machine innovation and market dynamics.

Key Details of the Acquisition

1. Assessment Criteria: The evaluation is based on the installed base rather than market value.
2. Closing Timeline: The transaction is expected to finalize in the forthcoming weeks.

Market Impact

Upon completion, Apollo’s strategic acquisition will create a slot machine powerhouse with more than 70,000 installed units, outperforming Light & Wonder’s installation base of 54,397. This positions the Everi/IGT combination to capture significant market share in North America, potentially surpassing industry leaders Aristocrat and Light & Wonder.

Insights from Fitch Ratings

1. Installation Base: Everi and IGT boast a combined total of 70K units.
2. Market Share: Post-transaction, the entity is expected to exceed the market share of Aristocrat and Light & Wonder.
3. Revenue Growth: Management projects mid-single-digit revenue growth through 2026, with additional potential from integrating Everi’s content into IGT’s networks, FinTech solutions expansion, and diversification into Class II game content.

Financial Perspectives

Despite the acquisition’s promise, it’s noteworthy that if the $6.3 billion paid by Apollo were to represent the market capitalization of the merged entity, it would still trail behind the market values of Aristocrat and Light & Wonder.

Expected Cost Savings

Apollo intends to finance the purchase through $4.3 billion in debt, including high-interest, junk-rated bonds. Nonetheless, significant cost savings are anticipated:

1. Projected Synergies: $140 million in cost synergies expected by the third year post-acquisition, with an additional $20 million savings in capital expenditures.
2. Financial Health: Everi reported $77 million in cash and $162 million in free cash flow for 2024.

Diversified Revenue Streams

The merger is set to create a diversified revenue model that could offer a competitive edge over Aristocrat and Light & Wonder:

1. Revenue Breakdown: 52% from gaming operations and sales, 23% from systems and software, and 25% from FinTech and iGaming.

Conclusion

The Apollo Global Management acquisition of Everi and IGT’s units is a game-changer for the slot machine industry. By merging Everi’s and IGT’s strengths, the combined entity not only surpasses its competitors in terms of the installed base but also sets a new standard for innovation and financial performance in the gaming sector. This strategic move underscores the evolving dynamics of the gaming industry and Apollo’s commitment to fostering growth and operational excellence.

FAQs

What is the significance of the Apollo acquisition of Everi and IGT units?

The acquisition signifies a strategic consolidation in the gaming industry, positioning the combined entity to outperform major competitors in terms of installed base and market share.

How will the merger affect revenue growth and market share?

The merger is projected to stimulate mid-single-digit revenue growth through 2026, enhance distribution networks, and expand into new gaming categories, thereby increasing market share.

What are the financial implications of the deal?

Although financed through substantial debt, the acquisition is expected to yield significant cost savings and create a more diversified revenue stream, enhancing the financial stability and growth potential of the combined company.