Rome-based Lottomatica S.p.A., one of the biggest lottery operators in the world, and GTECH Holdings Corporation, a leading provider of gaming technology and services, have announced an agreement through which the former will acquire the latter in a deal valued at 4 billion euros (US$4.83 billion). Lottomatica will pay $35 in cash for per each outstanding GTECH share.
The transaction will create one of the world¹s leading gaming solutions providers, with a significant global market presence and the broadest portfolio of lottery technology, services and content solutions. Lottomatica has operated the Lotto Game since 1993, when Italy's Finance Ministry granted it the public powers to operate the game as a state concessionaire. The license has been renewed until April 2012.
A member of the European Lotteries, Lottomatica carries out the entire chain of operations necessary to run the game. The company has over 1,000 employees and is controlled by De Agostini, which owns 58 percent of its share capital.
Lottomatica's overall Lotto wagers in 2005 reached 7.3 billion euros. Total Scratch & Win wagers in 2005 reached just under 1.5 billion euros.
GTECH is a leading gaming technology and services company. With more than $1.25 billion in annual revenues and 5,300 employees in over 50 countries, GTECH provides integrated technology, creative content and business services to effectively manage and grow today's evolving gaming markets. In targeted emerging economies, GTECH also leverages its operational presence and infrastructure to supply commercial transaction processing services.
Under the terms of the agreement, which was approved by the boards of directors of both companies, Lottomatica will acquire all of the outstanding shares of GTECH's common stock. The $35 per share consideration represents a premium of 15 percent over the closing price of GTECH shares on Sept. 9, 2005, the last trading day before GTECH announced that its board of directors had decided to explore strategic alternatives for the company. GTECH has approximately 132.8 million shares of common stock outstanding on a fully diluted basis, including options and shares issuable upon conversion of convertible debt. The 4.0 billion-euro deal includes the assumption of GTECH's existing net debt.
The acquisition will be effected by means of a "cash merger" of a special purpose vehicle into GTECH; as a result of which the shareholders of GTECH will be entitled to receive the $35 per share in cash, and the GTECH shares shall be de-listed.
GTECH is a member of the European Lotteries as a supplier.
Lottomatica will fund the transaction through:
- available cash of 0.4 billion euros ($0.48 billion);
- a 1.4 billion-euro ($1.7 billion) rights issue, expected to be voted upon by Lottomatica in April 2006 and launched in May 2006;
- 0.75 billion euros ($0.9 billion) of non-convertible subordinated securities, expected to be issued in May 2006; and
- the proceeds of a 1.9 billion euros equivalent ($2.3 billion) senior loan to be extended to the special purpose vehicle to merge into GTECH at the closing of the transaction; the loan will be guaranteed by Lottomatica.
De Agostini S.p.A. has agreed, subject to certain conditions, to exercise its full, direct and indirect, pro-rata share of the rights offering (0.8 billion euros, or US$1.0 billion). Credit Suisse First Boston (CSFB) and Goldman Sachs have agreed to underwrite Lottomatica¹s rights issue and subordinated securities and have committed to provide the senior loan financing. The financings and related underwritings and commitments are subject to Lottomatica maintaining a pro forma investment grade credit rating and other customary conditions. Furthermore, De Agostini and Lottomatica have agreed to enter into lockup undertakings consistent with those provided for in similar market transactions. It is expected that Lottomatica will maintain its investment-grade rating and that the new capital structure will have the flexibility to pay a dividend to shareholders and make investments in growth opportunities.
According to Reuters News Service, the new Lottomatica combination still has deep pockets. The new management team is already eying China and the privatizations of the U.K. National Lottery and the Turkish National Lottery, Milli Piyango.
In general, there are now two major global players in the lottery industry: the new Lottomatica combination and Intralot of Greece. Both groups have full gambling services, hardware and software and are also operators.
The takeover by Lottomatica shocked the European Lotteries and Toto Association, an independent European association composed of state lottery and toto companies established in Europe, of which Lottomatica (and Intralot as well) is a member. Many members believe the cross-border interests and principles will not fit in the operations of multiple gambling organizations and fear that there will be a backlash for non-cross-border operations.
By chance, the page of the EL's "Code of Practice" today showed the following message: "The requested URL /association/code_of_practice.php was not found on this server."