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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
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:
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 by agreeing to reconstitute the Board to include the Ader Group’s director nominees.
IMMEDIATELY COMMENCE A DUTCH AUCTION TENDER OFFER FOR 25% OF SHARES OUTSTANDING
We trust the Board shares our view that the Company’s common stock is significantly undervalued.