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Gaming Guru

Howard Stutz

Investor files preliminary proxy, says IGT has lost value

14 January 2013

An investor in IGT - International Game Technology, who is now pushing a proxy fight to win three seats on the company's board of directors, said Friday he has tried since last summer to "engage in a constructive dialogue" with management to discuss the challenges facing the casino industry's largest slot machine manufacturer.

In a preliminary proxy statement filed with the Securities and Exchange Commission, Jason Ader, the principal in New York-based Ader Investment Management, said he was denied several in-person meetings with IGT's board of directors.

Ader, who controls more than 8 million shares of IGT, was also forced to prove he was a stockholder in the worldwide gaming company, which has corporate headquarters in Las Vegas and manufacturing headquarters in Reno, employing some 2,900 workers statewide.

Ader said he will support the election of three independent nominees to the IGT board of directors in an effort make changes in the company's direction.

Ader Investment will nominate former IGT Chairman and Chief Executive Officer Charles Mathewson, Daniel Silvers of Ader Investment, and Raymond Brooks Jr., principal of R.J. Brooks Cos. and former CEO of ACA Financial Guaranty Corp.

"We believe investors are confounded by IGT's strategic direction and that IGT's valuation has suffered as a result," Ader said in a statement. "We are further convinced that IGT has abdicated its competitive advantage in its core business through its recent strategy. We expect that this new slate will add experience and depth."

IGT officials declined comment on the Ader proxy.

The SEC is expected to rule on Ader's proxy and on whether or not he can communicate with IGT shareholders within the next few weeks.

Ader said obtaining three independent seats on IGT's eight-person board would help refocus the company back to its original business model.

"We believe IGT is deeply undervalued as a result of a lack of focus on the core slot machine and systems business that we believe generated IGT's historic success, a lack of casino gaming industry experience in management ranks, and the results of poor capital allocation decisions highlighted by a series of costly non-strategic acquisitions," Ader said. "We are convinced our slate will make a major improvement in this company."

Wall Street has criticized IGT for several large acquisitions. Last year, the company spent $500 million to buy social gaming giant DoubleDown Casino. In 2011, IGT spent $115 million to acquire Swedish online gaming operator Entraction.

Wall Street has challenged IGT to show a return on investment for DoubleDown. Over the summer, the company pulled the plug on Entraction's online poker operations in Europe, saying the business model suffered because of regulatory changes.

IGT plans to use the Entraction technology in legal online gaming markets.

In the proxy filing, Ader detailed a time line starting in July in which he tried to set up meetings with IGT Chairman Phil Satre, IGT director Bob Miller, IGT CEO Patti Hart and IGT Chief Financial Officer John Vandemore.

Ader and Silvers met with Hart and Vandemore at IGT's Las Vegas offices on Sept. 19 to outline his company's concerns with IGT's direction. Vandemore met with Ader and Silvers in New York on Oct. 10.

In emails with Satre, Ader requested a face-to-face meeting with IGT's independent board members. However, he was afforded a 30-minute conference call with the board on Nov. 15.

Mathewson had a conversation with Miller, a former Nevada governor and a longtime IGT board member, on Nov. 19 in which he "discussed his belief that the company seemed to have become disconnected from the industry roots."

Satre and Mathewson also had email conversations.

According to the proxy filing, Vandemore told Ader at the end of November that neither he nor a representative from Ader Investment could attend IGT's investor day on Dec. 6 "because (IGT) could not verify that (Ader) had an ownership interest in (the company."

Ader emailed Vandemore proof of ownership on Dec. 5 and he attended the investor presentation the next day.

Ader, 44, has been on the board of directors for Las Vegas Sands Corp., since 2009. He was senior managing director at Bear Stearns from 1995 to 2003, where he followed the gaming industry.

Mathewson, 84, was IGT's chairman from 1986 until retirement in 2003. He served as "chairman emeritus" until his ties with the company were severed in 2010. He is credited with spearheading the slot machine maker's rise to the top of the casino industry in the 1990s.

Ader said Friday the proxy fight "is solely about improving shareholder value." He said IGT's 16.2 percent decline in its stock price in 2012, "speaks for itself."

Shares of IGT, traded on the New York Stock Exchange, closed at $14.98 Friday, up 1 cent, or 0.07 percent.

IGT revealed the proxy challenge Monday in a filing with the Securities and Exchange Commission.

Ader and Mathewson control 3 percent of IGT's outstanding shares and are seeking additional proxies for the company's 2013 annual shareholder meeting.

IGT told investors Monday it was nominating the company's eight current board members, including Satre, Hart and Miller. A date and location have not been set for the company's 2013 annual meeting.
Investor files preliminary proxy, says IGT has lost value is republished from