Hedge fund and Venetian operator Apollo may be eyeing IGT

Private equity firm Apollo Global Management, which sold its ownership stake in a small gaming equipment provider nearly a year ago, may want to get back into the slot machine business.

The Venetian, Palazzo and Venetian Expo operator is considering a $4 billion to $5 billion purchase of International Game Technology’s global gaming and digital gaming divisions, according to a report last week by Bloomberg News.

The global gaming division includes IGT’s legacy gaming equipment operations, including ownership of the Wheel of Fortune slot machine brand. IGT’s digital business includes its sports betting platform and its sportsbook management operations.

IGT, which is headquartered in Italy but maintains a small corporate office in Las Vegas and a manufacturing facility in Reno, said in June it was “evaluating strategic alternatives” for the two business units.

Truist Securities gaming analyst Barry Jonas, writing in a Sept. 15 research note after holding an investor meeting with IGT executives, said the company did not offer any specific updates on the potential division sales.

Jonas said IGT began contemplating a sale because there is a “lack of market appreciation” in its business structure.

IGT generates more than 64 percent of its revenue from its worldwide lottery business. In 2015, lottery giant GTECH acquired casino-centric IGT in a $6.4 billion buyout with the combined company taking on the IGT name.

In 2018, IGT created a digital gaming division to capitalize on the expansion of legal sports betting in the U.S. The division provides equipment, technology and wagering odds assistance to more than 100 casinos in more than 30 states and Canadian provinces.

Jonas wrote that IGT believes “the businesses could potentially rerate higher if separated.”

Apollo’s reported interest in IGT comes less than a year after the firm sold its 22 percent ownership in Las Vegas-based slot machine provider AGS for $41 million. Apollo never offered a reason publicly for selling its shares in AGS, which went public in January 2018 with an initial stock offering of $16 a share.

Apollo bought AGS in 2013 and directed its acquisition of 20 different gaming businesses to help the company expand. The company is primarily focused on tribal gaming markets, largely in Oklahoma.

Jonas didn’t discuss a potential Apollo offer for IGT but told investors the slot machine division had seen its North American sales increase in each of the past two quarters.

“IGT’s anecdotal sources show a tale of pent-up demand in terms of slot replacements that could support sales for the near future,” Jonas wrote. “Management believes that even in the event of a consumer slowdown, this pent-up demand should allow replacement sales to remain resilient for the foreseeable future.”

IGT recently reached a new 10-year licensing agreement with Sony Pictures Television for the exclusive rights to use the Wheel of Fortune brand across the company’s casino, lottery and social gaming products through the end of 2034.

Apollo paid $2.25 billion for the operations of the Venetian complex 19 months ago as part of a $6.25 billion purchase of the properties from Las Vegas Sands Corp. Real estate investment trust VICI paid $4 billion for the 63-acre site and buildings. Las Vegas Sands provided Apollo with $1.2 billion of seller financing, with the private equity company putting up another $1.05 billion in cash and financing.

Apollo pays VICI $257.5 million in annual rent to manage the Strip resorts.

This story was published Sept. 20 by The Nevada Independent and is republished here with permission.