S&P puts CIRSA on positive review for merger with Lottomatica

The new group would achieve revenues of 5,600 million euros and an adjusted EBITDA of 1,800 million.

The decision affects CIRSA's long-term credit rating of 'BB-' and the debt instruments issued by Cirsa Finance International. S&P expects that these notes may be matched to Lottomatica's 'BB' rating once the transaction closes.

At the same time, the agency has confirmed the 'B' rating of the payment in kind instrument, known as PIK, issued by LHMC Finco 2, the financial vehicle of CIRSA's majority shareholder. This loan, whose outstanding amount amounts to €755 million, will be repaid in full when the change of control takes place.

The transaction, announced on September 2, is expected to be completed during the second quarter of 2027, once regulatory authorizations and shareholder approval have been obtained. The result will be a listed group in both Italy and Spain and with leading positions in both markets and in several Latin American countries.

Lottomatica's current shareholders will control approximately 67.5% of the resulting company, while CIRSA shareholders will retain around 32.5%. Blackstone, which currently owns 74% of CIRSA through LHMC Midco, will cease to be the majority shareholder and will retain a 24% stake in the new group.

CIRSA will be integrated into Lottomatica, although the bonds issued by Cirsa Finance International will remain in force and will be guaranteed by the Italian group.

S&P highlights that both companies maintain similar financial policies. After the merger, the new group intends to increase its leverage between 2 and 2.5 times and maintain a flexible capital allocation policy. The plan contemplates returning up to 4,000 million euros to shareholders over the three years following the closing of the operation.

The agency estimates that the combined group will have consolidated debt of approximately €5.4 billion by the end of 2027. This figure would represent an adjusted debt equivalent to about three times EBITDA.

The estimate includes a €1.2 billion debt issuance to finance extraordinary distributions to shareholders and payments to CIRSA shareholders that do not support the transaction. It does not include the €755 million PIK loan, which will be fully amortized.

S&P notes that the integration will double CIRSA's current scale. Its forecasts suggest that the new group will achieve joint revenues of €5.6 billion and adjusted EBITDA of €1.8 billion by the end of 2027, taking into account the expected timetable for obtaining synergies and the extraordinary costs associated with the operation.

The merger will give rise to one of the main gaming groups in Europe and Latin America, with a particularly relevant position in Italy, Spain, Panama, Colombia and Peru.