In this episode, I talk with Peter Smith of Palm Harbour Capital. Peter shares his background and then dives deeply into InternationalGaming Technologies (ITG).

In a nutshell, IGT is interesting because it has agreed to sell its Gaming & Digital business to Apollo. IGT will receive ~$3.6BN of net proceeds, when the transaction closes and the Remaining Lottery business is trading at 5x EBITDA on a pro forma basis (peers trade in the high single digit range). What’s the catch? ITG has a large Italian lottery contract up for renewal in Q2 2025 which investors are worried about.

1:45 – Peter shares his background and how a Texas native ended up in London

3:30 – Palm Harbour overview

4:30 – Peter’s experience backpacking around Europe

4:50 – How Peter landed his first job in Germany

6:45 – How Peter thinks about portfolio construction

8:45 – Why Peter thinks ex-US markets are less competitive

10:30 – Peter’s approach to spin-offs

12:00 - Peter provides an overview of International Game Technology (IGT)

13:45 – Apollo is buying the slot machine side of the business

15:45 – History of IGT’s lottery business

16:00 – Economic resilience of the lottery business

20:00 – Why IGT launched a strategic review

21:30 – Why the market did not like the initial spin-off proposal

23:30 – Overview of Italian lottery renewal

27:30 – Why is the market concerned about the Italian lottery renewal?

35:45 – Why is IGT likely to win the Italian renewal?

40:35 – How important is this contract for IGT?

44:35 – How do you think about IGT’s valuation in a scenario where it loses the Italian contract?

46:45 – What odds is the market implying that IGT is going to lose this contract?

48:10 – How much of Apollo’s $4.05BN bid will be lost to expenses and taxes?

50:20 – How do you view IGT’s management team?

52:05 – Would the RemainCo ever get sold?

54:10 – What is timing of Italian renewal and the Apollo transaction closing?

1:00 – Where you can go to learn more about Peter Smith and Palm Harbour Capital