IGT facing proxy fight from company’s former chairman

The former chairman and chief executive of International Game Technology is challenging the slot machine maker's current leadership and has launched a proxy fight to regain a seat on the company's board of directors.

Charles Mathewson, IGT's chairman from 1986 until retirement in 2003, is working with New York-based Ader Investment Management, which is headed by former gaming industry Wall Street analyst Jason Ader.

Mathewson, 83, was IGT's "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.

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

According to IGT, the Ader group owns about 3 percent of the company, or roughly 8.05 million shares. Ader said it informed IGT that it intends to nominate Ader, Mathewson, and two other individuals to the company's board of directors.

Ader, 44, now sits on the board of directors for Las Vegas Sands Corp., and was a member of the Western Liberty Bancorp board before the company was bought out by Western Alliance Bancorporation in October.

He was senior managing director at Bear Stearns from 1995 to 2003, where he followed the gaming industry.

A spokesman for Ader declined comment Tuesday, saying the company was in a "quiet period" concerning the IGT matter.

Shares of IGT closed at $14.79 on the New York Stock Exchange Tuesday, up 11 cents, or 0.75 percent. IGT's shares closed at a record high of $49.06 in February 2008.

IGT told investors Monday it was nominating eight board members, including current company CEO Patti Hart and current Chairman Phil Satre. No date has been set for the company's 2013 annual meeting.

Wall Street analysts Tuesday shied away from commenting on the potential proxy fight.

Speaking on background, industry insiders said the dispute centers on the direction of IGT, the gaming industry's largest slot machine manufacturer with corporate offices in Las Vegas and Reno.

The company's stock price dropped 18 percent in 2012, the third straight year the company's annual share price has tumbled.

"We're not happy with the stock price either," Hart told Bloomberg News on Monday.

Hart, who took over as IGT's CEO in April 2009, has been criticized for several large acquisitions by the company. Last year, IGT 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 September, Hart told the Las Vegas Review-Journal that the DoubleDown purchase would eventually be viewed as "the best investment" IGT had ever made behind the development of cashless gaming technology.

In December, following a well-attended investors day, several analysts came away viewing the slot machine maker bullishly heading into 2013.

"IGT did a better job describing how it will drive growth across its core businesses, demonstrating the potential of DoubleDown, plus its focus on returning capital," Credit Suisse gaming analyst Joel Simkins said in a research note.

In a statement Monday, IGT said it has held "numerous calls, emails and face-to-face meetings" with Ader, which included a presentation he made in November 2012 to the company's board. Company officials said the proxy fight "is the result of a long-running dispute between IGT and Mr. Mathewson."

IGT said Mathewson "has repeatedly attempted to exert influence over the company's operations and extract personal financial benefits at the expense of all other shareholders."

Mathewson has donated millions of dollars to the University of Nevada, Reno, including a $1 million contribution last August to establish a professorship in his name at the school's business college.

His $5 million donation help fund the construction of the Mathewson-IGT Knowledge Center, which is considered one of the most technologically advanced libraries in the country.

Contact Review-Journal reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.
Follow him on Twitter @howardstutz