IGT Urged to Immediately Commence ‘Dutch Auction’ Tender Offer

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IGT Urged to Immediately Commence ‘Dutch Auction’ Tender Offer

Orange Capital, LLC issued an open letter to the Chairman of the Board of International Game Technology (IGT).   *Note that Jason Ader is being represented by top PR FIRM  5WPR (www.5wpr.com)


Orange Capital, LLC, a New York based investment firm, has issued the following open letter (text below) to the Board of Directors of International Game Technology (NYSE: IGT) in response to the Company’s recent share price performance and election contest with the Ader Group:


The full text of the letter follows:


Philip G. Satre

Chairman of the Board

International Game Technology

6355 South Buffalo Drive

Las Vegas, Nevada 89113


Dear Mr. Satre:


Orange Capital, LLC (“Orange Capital”) is a New York based investment fund and

beneficial owner of 1,228,562 shares of International Game Technology (“IGT”

or the “Company”) common stock. In addition, we own the right to purchase

2,400,000 shares of IGT common stock. Orange Capital has carefully studied

IGT’s operating strategy and capital allocation during the tenure of Ms. Patti

Hart as Chief Executive Officer. We have also carefully reviewed the proxy

statements and other public filings of both the Ader Group and the Company in

connection with the election contest at the upcoming Annual Meeting scheduled

for March 5^th, 2013.


IGT’s valuation is near its all-time low on the basis of net income and cash

flow. We believe this reflects the investment community’s lack of faith in the

operating strategy and capital allocation decisions of IGT management and the

Board of Directors (“Board”). Based on the Company’s fiscal 2013 guidance, IGT

will generate approximately $400 million of after-tax free cash flow (“FCF”).

This represents nearly 10% of the Company’s current market capitalization.

Specifically, we have two recommendations for the Board:


      1.   Immediately commence a “Dutch Auction” tender offer for 25% of

           IGT’s outstanding shares; and


           Amicably resolve the ongoing election contest with the Ader Group

      2.   by agreeing to reconstitute the Board to include the Ader Group’s

           director nominees.






We trust the Board shares our view that the Company’s common stock is

significantly undervalued.


An immediate Dutch Auction tender offer for 25% of the outstanding shares

would cost approximately $1.2 billion at a slight premium to current market

prices and would be approximately 22% accretive to earnings per share assuming

a 6% funding cost. Given IGT’s current Net Debt/EBITDA^1 stands at only 1.9x,

we believe there is ample balance sheet capacity for an accelerated return of



Following the Dutch Auction, IGT would still generate approximately $350

million of FCF and the Company’s Net Debt/EBITDA would fall to approximately

3.0x by the end of fiscal 2013. The Company would maintain significant

financial flexibility and leverage would remain well below the combined

WMS/Scientific Net Debt/EBITDA of 5.0x.


IGT’s existing credit facilities limit the Company’s “Net Funded Debt Leverage

Ratio” to 3.5x. While the Dutch Auction tender offer may require an amendment

from the Company’s lenders, given current credit market conditions and IGT’s

resilient cash flows, we believe the Company’s lenders would grant an

amendment on reasonable commercial terms, if required.





We believe an election contest is not in the best interests of stockholders

and the Company should seek a mutually agreeable resolution with the Ader

Group, including Board representation. In its proxy materials and public

statements, we believe the Ader Group has identified significant challenges

facing the Company. We also believe the Ader Group has nominated three highly

qualified individuals who can bring substantial expertise and talent to the

Board. We fully support the Ader Group’s agenda.


We are extremely disappointed that the Company has engaged in a public

mud-slinging campaign against the Ader Group, including IGT’s former CEO

Charles Mathewson. We have a great deal of respect for Jason Ader, one of the

gaming industry’s most highly regarded financial analysts. Mr. Ader was the

number one ranked gaming analyst in the Institutional Investor poll for three

consecutive years and on Institutional Investor's All-America Research Team

for nine consecutive years.


Mr. Ader has also served on a public company board with an outstanding track

record for creating enormous stockholder value. Mr. Ader has been a member of

the Board of Directors of Las Vegas Sands Corp. (“Sands”) since early 2009.

Sands is one of the gaming industry’s most admired companies and a significant

customer for IGT. During Mr. Ader’s tenure, Sands’ stockholder returns and

capital management have been nothing short of spectacular. Sands has

appreciated more than 1,000%, including dividends.  Since 2009, Sands

successfully listed its Macau operations, refinanced its debt obligations, and

paid special stockholder dividends from excess capital.


With respect to Mr. Mathewson, we find IGT’s attempts to discredit him highly

unproductive. Mr. Mathewson created enormous stockholder value during his

tenure at IGT, and he maintains a strong reputation amongst the financial

community and with the Company’s gaming customers. We are not alone in finding

your comments towards Mr. Mathewson distasteful and without merit. Mr. Steve

Wynn, CEO of Wynn Resorts, issued the following statement:


“I have known Chuck Mathewson both as a business man and as a friend for over

30 years. My various companies have done business with him during his tenure

as Chairman of IGT, and we have benefitted from his expertise and the

leadership he brought to the position… It was during Chuck’s time at IGT that

the company came into dominance as the principal supplier of slot machines in

the United States. Since his departure the company has seemed to have lost

that edge… I am personally saddened by what appears to be a paid professional

attempt to smear him. I’m left with the impression that such an effort is

motivated by IGT’s current management’s attempt to distract stockholder

attention from current performance."^2


We hope this letter helps the Board better understand how certain of its

stockholders may perceive the issues in this election contest. Should you have

any questions or concerns regarding our views, I can be reached at




Daniel Lewis

Managing Partner

Orange Capital, LLC


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