Scientific Games (SG), a major gaming company with headquarters in Las Vegas, has announced that it will be selling its lottery business to Brookfield Business Partners, a Canada-based investment company. Details of the deal have been finalized, and SG will receive up to $6.05 billion from the sale.
Of that number, Brookfield will pay around $5.83 million in cash, with SG potentially receiving up to $225 million more over the course of the next two years, dependent on meeting certain profitability thresholds in 2022 and 2023.
As things stand now, the transaction should be finalized in Q2 of 2022, pending required regulatory approvals and finalizing details of the deal.
In November 2020, SG’s iLottery platform in Pennsylvania was certified under the Internet Compliance Assessment Program. The certification is considered the gold standard is the US lottery industry.
Maximizing value for shareholders
According a statement from SG, the deal is the result of a thorough review that aimed to optimize the company’s portfolio. The analysis concluded that divesting the lottery business was the best way forward, minimizing complexity while maximizing the value for SG and SG Lottery.
SG Lottery has a presence in more than 50 countries worldwide and covers a variety of products, including instant lottery games, terminals, sports betting and iLottery. The business currently holds around 69% of global instant product sales.
“The significant near-term proceeds from this transaction, as well as our previously announced sale of sports betting, will transform our balance sheet and provide the financial flexibility to invest organically and inorganically to accelerate our strategies,” said Barry Cottle, CEO of SG.
“This marks a major milestone and puts us on a clear path to achieve our vision to become the leading cross-platform global game company and unlock our full value for shareholders.”
The sentiment was echoed by David Nowak of Brookfield Business Partners, who said the company was looking forward to supporting this continued growth through their own capabilities and global reach.
SG looking to restructure
Things have not been going well for SG as of late, as the company has accumulated $8.2 million in debt. Looking to recover its balance sheet, SG sold its sports betting division last month to Endeavor Group Holdings in a cash-and-stock deal valued at $1.2 billion.
The strategy worked, as the company started to see some improvements, with their net debt leverage coming down to 7.2 times, a significant reduction from 10.5 times that was recorded at the start of 2021.
An analyst from Jefferies told Reuters that “they saw the outcome incrementally favorably, as the company would get 100% of the net proceeds at closing, and expected leverage to come down imminently.”
SG’s shares have increased 17.3% since the company announced its divestment plans back in July, indicating that investors saw this is a healthy and necessary move. As for the SG Lottery business, it is expected to see a 14% growth in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), closing at $498 million in fiscal 2022.
