International Game Technology (IGT) has been managing the Italian lottery since 1993. The company, in a competitive process held earlier this year, competed with groups such as Novomatic, Allwyn and Flutter for the new contract. The current agreement ends in November this year.
Last Tuesday (20), IGT announced that it will lead the winning consortium, called LottoItalia, also formed by Allwyn, Arianna 2001 and Novomatic Italia. The new contract will be valid until November 2034.
The consortium submitted a proposal worth €2.23 billion upfront, to be paid in three installments. Therefore, the disbursement should occur between the date of signing of the contract and April 2026. Initially, the first and second installments, of €500 million and €300 million, are scheduled for 2025.
IGT increases investment and bets on the digital expansion of the Italian lottery
Barry Jonas, a representative of Truist Securities, said in a note that the new initial rate easily exceeds the value of the 2016 round (€770 million) and Truist‘s own forecasts, which were between €1.3 and €1.5 billion.
IGT CEO Vince Sadusky said in an earnings call that the company has set aside $500 million to invest in the Italian lottery if it wins the concession. This amount is part of a larger €1 billion financing.
According to Sadusky, the high operating rate signals the “significant value” of the new concession. IGT believes that the investment should boost revenues and profits in the long term, even though the company has recorded a 10% reduction in the group’s quarterly revenue.
Vince Sadusky explained: “In addition, we plan to significantly increase our iLottery sales and use this momentum to expand into Italian B2C iCasino, sports betting and other digital gaming businesses.”
Allwyn is contributing 32.5% of the license fee and equity investment. Robert Chvatal, CEO of Allwyn, said he is “excited” to continue the partnership with IGT in Italy for the next nine years.
Chvatal said: “We are pleased that Allwyn’s positive contribution to the consortium, including our proven track record of modernising and growing lotteries across Europe, will continue to support IGT’s exemplary management of an important Italian national asset.”
“We look forward to working together to grow the Italian Lottery, while developing innovative solutions to support responsible gaming.”
Concession is considered strategic for the lottery sector
According to the Financial Times, the grant fee will be 6% on total bets, with an additional gross of 8% for transactions made through digital channels.
In the official statement, Marco Sala, Executive Chairman of the Board of IGT, highlighted the relevance of the agreement. In his words: “IGT and its predecessor companies have successfully managed the license for more than 30 years through constant innovation and the introduction of cutting-edge technology.”
He added: “The award is very gratifying and we are honoured and excited to continue working with ADM [the Customs and Monopolies Agency] for another nine years.”
Barry Jonas, in Truist’s analysis, reinforced IGT’s expectation of winning the contest based on the regulator’s criteria. Jonas explained: “Remember that the awards are based on a scoring system that weighs 60% financial and 40% technical. Based on this scoring system, IGT emerged victorious, although an official announcement is yet to be made.”
Jonas did not see any significant negative impacts for Flutter, given the auction result. “Our opinion on Flutter taking control of Lotto at any cost was mixed. We have always considered the traditional lottery a business with a lower multiple, moving away a bit from Flutter’s main digital focus.”
