IGT, Twin River reach deal to join forces, expand Lincoln casino
Thursday 30th January 2020
Twin River would also open a new headquarters somewhere in Providence. The deal ends a bitter feud.
PROVIDENCE -- The titans of Rhode Island's gambling industry, Twin River and IGT, have ended their months-long war with an agreement to join forces to create a new company, setting the stage for a $100-million renovation and expansion of Twin River's Lincoln casino and the opening of a 12,000-square-foot Twin River headquarters in Providence.
If the proposed agreement is approved by lawmakers and state gambling regulators, Twin River would evolve from a casino-operating company to one that provides video-slot machines, giving it a large source of the revenue now going to out-of-state game manufacturers and suppliers.
International Game Technology would emerge as 60% shareholder of the new company, with a clearer shot at winning the 20-year contract it has been seeking from the state, without Twin River executives -- and the big-name gaming industry players that Twin River had lined up as potential partners in a rival bid -- nipping at its heels. Twin River would have a 40% stake.
The underlying assumption: IGT will continue to seek General Assembly approval of legislation authorizing the governor to extend its contract through 2043, while committing to keep 1,100 jobs in Rhode Island, invest $150 million in upgrades and pay of $25 million in license fees -- $6.5 million of which will now be paid by Twin River. (The wage pledge is higher than initially proposed.)
As the two companies described their agreement, it would also "ensure that the gaming floor and its slot machines continue to drive over $300 million a year to the State, minimize the risk of systems and technology conversions and overall, enhance Rhode Island's gaming competitiveness with Massachusetts and Connecticut."
It remains unclear if the partnership will allay state lawmakers' concerns about entering into a new 20-year, no-bid Lottery contract, especially in light of the findings of an independent analysis of Rhode Island's current and proposed Lottery contracts with IGT.
But legislative leaders applauded the detente between the two companies principally responsible for providing the state's third-largest source of revenue.
"The state's taxpayers will be the ultimate beneficiaries of a successful economic development partnership that maintains good jobs while protecting and hopefully enhancing an important state revenue stream,'' said Senate President Dominick Ruggerio.
"I am first and foremost pleased that our two partners most responsible for our critical gaming revenues have opted to put the needs of the taxpayers before their own," said House Speaker Nicholas Mattiello. "I am also pleased that the proposed plan protects the 1,100 existing IGT jobs -- that has always been one of my main concerns."
Both promised "full and thorough" public review of the proposal and accompanying legislation.
The announcement Thursday morning, at IGT's Providence headquarters, follows more than six months of public bickering between the two companies over the terms of the proposed IGT contract, which would have given IGT the right to provide and extract revenue from up 85% of the video-slots at the Twin River casinos in Lincoln and Tiverton.
Twin River accused IGT -- which began its evolution into an international powerhouse and a Lottery-machine manufacturer in Providence -- of overcharging the state and providing it with low-performing machines. IGT, in turn, challenged Twin River's ability to take over any portion of the multifaceted technology and machine-supply services that IGT provides the Rhode Island lottery.
IGT said that if the state put its current contract, which expires in 2023, out to bid, the company could pull up stakes in Rhode Island, taking 1,000-plus IGT jobs with it. One of the expert witnesses it brought in to testify to legislative committees also sharply criticized the state of the Lincoln casino.
The proposed calls for a commitment from Twin River to embark on an 18-month renovation and expansion of the Twin River Casino Hotel, "subject to receiving all necessary state and local approvals."
The project would include "a 40,000 square foot addition to the first floor gaming space, the addition of a 14,000 square foot spa in the hotel which will now have a dedicated entrance, greater separation between the smoking and non-smoking areas of the gaming floor and removal of most of the slot machines on the second floor to allow for a new entertainment concept to be announced at a later date.
"The combined improvement and expansion in Lincoln along with additional technology investments will exceed $100 million,'' according to the announcement.
"We all recognize the New England gaming landscape has changed significantly in just the last short five years, and our players have more choices,'' said Marc Crisafulli, executive vice president of Twin River Worldwide Holdings and president of Twin River's Rhode Island operations. "It is crucial that not only the gaming floor in Rhode Island be as vibrant and content-driven as our competitors, but that the wider range of amenities also meet our customers' expectations."
"Both the state and IGT indicated that substantial investment in the facility would be helpful, and we heard them loud and clear,'' he said.
Twin River, which is currently leasing temporary space at 100 Westminster St., also committed to establishing a 12,000-square-foot headquarters at a location yet to be determined in Providence.
Among the other highlights of the IGT-Twin River agreement:
-The new joint venture announced by IGT Chairman Robert K. Vincent and Crisafulli "will focus on creating and maintaining a competitive gaming machine offering(s). The new joint venture will be established effective January 1, 2022. The companies will make various investments that will result in IGT having a controlling 60% stake in the new company and Twin River owning the remaining 40%."
-Along the way, Twin River Worldwide Holdings will "seek licensing as a technology provider and will acquire approximately 23% of the slot floor from existing third party vendors."
-The company created by this partnership would supply all of the gaming machines manufactured by IGT and "multiple other manufacturers."
-The new company will be governed by a five-member board of directors with Jay Gendron, chief operating officer of IGT, serving as its chairman and Crisafulli as vice chairman. The remaining members would be jointly selected.
IGT-supplied machines currently dominate the casino floor in Rhode Island, but two other companies, Scientific Games and Everi, provide about 23% of the offerings.
The suppliers get 7% of the net income from each machine they place on the casino floor. Scientific Games got a $6.2-million slice of the pie last fiscal year, Everi $1.5 million and IGT $28.3 million as a machine provider. IGT got another $12.8 million for providing the central communications system that lets the Lottery keep tabs on the money in and out of the 5,000-plus machines.
Going forward, the proposed new IGT-Twin River company would be the exclusive provider of the machines, sharing 100% of that revenue.
"When we take a step back ... [and] look at the value created for all of Rhode Islanders by this combined proposal, we think it is significantly better than anything that could be achieved in a competitive bid process, and that's why we are giving up our request,'' Crisafulli said.
"We think it is a great deal for the taxpayers and they would not get a better deal by going out to bid,'' echoed Vincent.
House Republican Leader Blake Filippi's initial response was cautious. He said: "I think everyone is happy the two largest businesses in this industry are no longer at odds, but ... we are going to review their proposal, understand exactly what it is and then determine what is in the best interests of taxpayers and the state."
But the state National Republican Committeeman, and two-time Mattiello challenger, Steven Frias said the testimony by Twin River and others during the legislative hearings has, in his mind, already proved: "IGT's twenty-year billion-dollar no-bid contract is a bad deal for taxpayers. This deal does not automatically become a good one for taxpayers because IGT and Twin River will now be business partners."