Shares in International Game Technology (Ticker: IGT) jumped more than 9.0% to a near six-month high of $17.00 on Wednesday morning after Italian company GTECH S.p.A. agreed to acquire the maker of slot machines for around $4.7B in cash and stock and the assumption of $1.7B in net debt. According to a joint press release issued by the companies, IGT and GTECH will combine to form a new holding company (NewCo) in the UK.
The sharp move in the share price and effective floor on the price of the underlying following the deal may be boon for one large options market participant who appears to have sold roughly 100,000 of the Aug 13.0 strike put options on IGT last Tuesday at a premium of $0.20 each. The put seller pocketed $2 million in premium by selling the contracts and keeps the full amount of premium in the event the August expiry puts expire worthless with shares above $13.00 next month. Terms of the deal provide IGT shareholders with an aggregate value of $18.25 per IGT share, comprising $13.69 in cash plus 0.1819 ordinary share of NewCo, and well above the $13.00 striking price on the sold put options. Open interest in the contracts currently stands 92,415 contracts and the largest of any series available on IGT.
Chart – Heavy volume in Aug 15 ’14 13.0 strike puts on 7/08/14
