IGT Downgraded as Strategic Review Turns Sluggish

Shares of International Game Technology (NYSE: IGT) slumped Th after the gunstock was downgraded by Jefferies.

The research strong lowered its rating on the gaming device manufacturer to “hold” from “buy” piece trimming its toll direct to $29 from $36. That young calculate implies upside of 15.3% from stream levels. Jefferies told clients that the strategical review article proclaimed by IGT utmost June is unlikely to bear near-term fruit.

At that time, the gaming fellowship said it would explore strategic alternatives for its world(a) gaming and PlayDigital units. Those options could include sales, mergers, or spin-offs of the businesses, or retaining the segments and boosting investment funds inward those entities. The London-based company believes evaluating alternatives for those units put up unlock shareholder value.

The promulgation sparked a rebound inward IGT shares, contributing to an impressive bleed o'er the next several months. However, the stockpile retreated during the quaternary canton and that playground slide has carried over into 2024 as the shares are cancelled 9.58% over the past week. IGT is at present 26.32% to a lower place its 52-week high, exceeding the definition of a assume market.

IGT Sale, Spin-Off Unlikely Anytime Soon

While IGT has retained Deutsche Bank, Macquarie Capital, and Mediobanca as financial advisors, indicating it plans to potentially pee-pee moves with the planetary gaming and PlayDigital units, Jefferies told clients non to wait lucidness on those fronts o'er the near-term.

Since the announcement of the strategic review, venture has surfaced regarding potentiality suitors for the IGT assets. For example, reports emerged lastly September that Phoebus Global Management (NYSE: APO) could make up an offer for IGT’s planetary gaming arm.

Such a dealing could soften a terms mark of $4 billion to $5 one million million — impressive congener to IGT’s stream marketplace capitalization of $5.23 billion. That damage straddle also represents a deduction to the valuation assigned to slot machine contender Aristocrat Leisure, but as of yet, no more formal offer for IGT’s one-armed bandit unit has been made public.

Jefferies added that IGT faces some overhangs inward its Italy lottery business organization and that it expects other gaming equities will outperform the Wheel of Fortune manufacturer this year.

Why IGT Transactions Matter

IGT is potentially incentivized to divest its world(a) gaming and PlayDigital units in some spring because that would grant the company to direction on its lucrative drawing business — a segment that arguably doesn’t have the credit entry it deserves from the investiture community.

The drawing stage business accounts for 75% of pro-forma earnings and is a major earnings before interest, taxes, depreciation, and amortization (EBITDA) driver, undervalued comparative to competing assets. Analysts indicate that when drawing assets are committed to conglomerate-like gaming companies, which is the example with IGT, don’t get under one's skin the grasp they should from securities industry participants.

Data support domestic help drawing sales are soaring this year, and the drawing has historically been unity segment of the gaming manufacture that proves sturdy when consumers telephone dial endorse discretionary spending.

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