GTK - GTECH

[Phaceliacapital]

Hi all,

 

I was making some back of the envelope calculations regarding GTECH's acquisition of IGT, and was wondering whether anyone has feedback on my understanding of the proposed merger. The deal is neatly detailed here:

 

http://www.gtech.com/eng/investor/documents/presentation_gtech_announcement_16072014.pdf

 

(IGT has a similar presentation on their website).

 

http://i58.tinypic.com/24zg6q0.png

 

(as in the presentation my numbers are exchanged to USD at 1.36).

 

The offer is 75% cash and 25% stock, for a total of 18.25 per IGT share. In rough calculations this means that the total price offered is around:

 

Total: 4507.75

 

of which

 

3380.81 in cash

1126.94 in stock (with current USD GTECH price of around 25.68).

 

This would mean that 1126.94/25.68 = 43.89 would be issued in new stock to finance the stock deal of the offer. If you use these numbers on current shares outstanding for GTECH ( 174) + issued (43.89) you get a total of 217.89 for the new entity NewCo.

 

Using these numbers would confirm that old GTECH holders end up with 80% of the company, and IGT holders end up with 20% of the company, this is in line with the corporate presentations so I guess that these numers are somewhat correct.

 

The main question I am having is what the structure will look like once the takeover is done.

 

GTECH is financing everything with a bridge loan of 10.7 bn (which includes the cash part of the offer, backstop for IGT & GTECH loans and other refinancing).

 

With this 10.7 bn, and current numbers am I safe to assume that the NewCo structure will look roughly like this:

 

http://i57.tinypic.com/29bbjer.png

 

Numbers for GTECH & IGT are from last friday. For simplicity I assume cash & preferreds remain the same, and at the debt side I use the 10.7 bn bridge loan. Is this capital structure somewhat correct? The MCAP is derived as 218 shares * 25.68 (current price GTECH share).

 

Thanks for your input and happy investing,

 

phcap

[Haasje]

I am looking at this situation too. I was wondering what the special shares do that will be issued under the loyalty program 3 years after the merger? Do these only carry voting interest, no dividend? Or anything of monetary value?

 

I guess they are designed to keep the family in control of the Newco but just making sure I'm not missing something there. I e-mailed IR but thought people may know here as well.