程阳：Lottomatica buys Gtech for $4.65 billion

PROVIDENCE, R.I. -- Italian lottery company Lottomatica SpA struck a deal Tuesday to purchase U.S.-based Gtech Holdings Corp. for $4.65 billion in cash to create one of the world's largest gaming technology operators.

The companies valued the deal at $4.8 billion, including the assumption of Gtech debt, and said the combined company is expected to operate in more than 50 countries, with revenues of $1.9 billion and more than 6,300 employees.

Gtech, based in West Greenwich, R.I., provides lottery systems -- including instant ticket machines and lottery terminals located in convenience stores -- for 25 states, including New Jersey and California. It has 62 customers in more than 50 countries, spokeswoman Angela Wiczek said. Lottomatica holds the license for the Italian lottery, one of the largest lotteries in the world.

"Because of this merger, we've become a much bigger and financially stronger company," Wiczek said.

In a note issued to investors Tuesday, Morgan Stanley cautioned that Lottomatica's acquisition is contingent on securing financing, which adds some risk. Lottomatica plans to launch a $1.7 billion capital increase to finance the deal, and will seek a$2.3 billion syndicated loan.

Gtech is larger than Lottomatica, with annual revenues of $1.26 billion, compared to the Italian firm's $707 million.

In addition, the deal presents possible regulatory hurdles because Gtech serves so many state lotteries, said Tom Burnett, director of research at Wall Street Access, a New York-based brokerage firm.

"This is not as clean as Gtech holders might have hoped for. It involves a number of risks. It could take some time," Burnett said. Burnett said he did not own shares in either company.

Gtech shares had closed Monday in New York at $33.50, giving it a market capitalization of $4.24 billion.

Standard & Poor's credit analyst Guy Deslondes said in a statement the main benefits of the deal would be "product and geographic diversification, technology synergies covering the gaming sector's entire value chain, as well as certain commercial advantages."

Lottomatica said it will buy all of Gtech's outstanding common stock for $35 a share. The offer represents a premium of 15 percent over the closing price of Gtech shares on Sept. 9, the last trading day before Gtech announced that its board of directors had decided to explore strategic alternatives for the company.

Burnett said Gtech shareholders could be big winners, if the deal goes through.

"They get a very good cash price. But they're also getting it from somebody who makes the whole transaction kind of suspect because so many moving pieces are involved," he said, referring to the financing and regulatory issues the deal faces.

"We are highly regulated, so those are issues that we expect to work through," Wiczek said. "But we expect to be able to do that in a three- to six-month time frame."

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