Scientific Games Thursday announced it has submitted a proposal to its Board of Directors to acquire the remaining 19% equity in SciPlay. If the all-stock transaction is approved, SciPlay will become a wholly-owned subsidiary of the gambling products and services provider.
Scientific Games currently owns approximately 81% of the economic interest and 98% of the voting interest in SciPlay, a developer and publisher of digital games on mobile and web platforms.
In a letter to the board, Scientific Games CEO and President Barry Cottle wrote that the merger will “deliver significant operational, strategic and financial benefits and drive shareholder value in excess of what each company could generate on a standalone basis.
“Further, we believe SciPlay public shareholders will benefit from increased trading liquidity as a result of being part of a pro forma entity with a market capitalization of $7.0 billion (based on the closing share prices of SGMS and SciPlay on July 14, 2021) and a public float that would be approximately 18 times larger than SciPlay today.”
The bid to acquire the remaining equity of SciPlay comes weeks after the Las Vegas-based company announced June 29 it was divesting its sports betting and lottery businesses. That divestment is the result of a strategic review that started in September 2020.
In his letter to the board, Cottle wrote the divestment of the sports betting and lottery businesses will “strengthen our balance sheet by materially de-levering, while creating the financial capacity to invest in our largest growth opportunities, including the SciPlay business.”
Truist Securities Director and Senior Equity Analyst Barry Jonas said in a statement that the proposed transaction would solidify Scientific Games’ goal of becoming a content-led growth company.
“The all-stock transaction would effectively value SciPlay’s minority piece at ~$430M (using Scientific Games’ closing stock price yesterday),” Jonas said. “For comparison, in March of 2019 Scientific Games received IPO proceeds of $342M for 18% of SciPlay ($30M of which was used for fees).”
Jonas calculated SciPlay shareholders would receive 0.25 shares of Scientific Games common stock for each SciPlay Class A share owned, which equates to an enterprise value of $1.9B. “This represents an 11% premium based on closing stock prices as of July 14, 2021, and a 10% premium based on the 30-day VWAP of SCPL common stock.”
