Scientific Games moves closer to ASX listing

by Mia Chapman Last Updated
Scientific Games’ lotteries arm receives varying valuations from investors

Scientific Games has moved closer to listing its lottery business in Australia.

Casino.org reports that the gaming company has listed its lottery venture in an initial public offering that could be worth as much as $5 billion.

Scientific Games Lottery provides the systems used to generate Mega Millions and Powerball tickets.

A pair of unidentified sources said the Las Vegas-based slot machine manufacturer is pitching to local fund managers on the Sydney listing, which it is hoping to value the lottery unit at more than $10 billion.

At $5 billion, the listing would be Australia’s biggest IPO since the 2014 debut of health insurer Medibank Private at a $4.9 billion valuation.

In early July, Scientific Games said it was parting ways with its lottery unit and its Don Best wagering arm.

Scientific Games President and chief executive officer Barry Cottle said that the decision to divest “reflects key steps to optimise our portfolio and strengthen our balance sheet by significantly de-levering while also targeting investments in our largest growth opportunities. These steps will accelerate our path to become a content-led growth company focused on leading in both land-based and digital markets.

The Nasdaq-listed Scientific Games has engaged Sydney-based Jarden Australia to run the numbers on a potential ASX-listing and feed their input into a broader strategic review that’s mulling options to fix up the company’s debt-heavy corporate structure.

An ASX-listing is believed to be just one option on the table, however sources said it was a serious consideration.

It noted at the time the transactions could materialise in the form of an initial public offering, a merger with a special purpose acquisition company, or an outright sale or combination with another firm.

Scientific Games Lottery has dozens of customers across the world

Within days of that announcement, reports surfaced that the company was holding talks with Australian investment banks regarding a Sydney listing for the SG Lottery unit.

While SG Lottery has more than 130 customers in over 50 countries, North America and Europe combined for 97 per cent of the unit’s fiscal 2020 revenue.

Still, Australia makes for a sensible listing venue for the business, should Scientific Games opt to go that route.

Because of the local presence of companies such as Aristocrat Leisure and Tabcorp, Australian investors are already highly familiar with a business like SG Lottery.

As a result, the parent company may be able to fetch a higher valuation for the unit in Sydney than it would in New York.

An Australian IPO by SG Lottery could also be a template for Tabcorp, which earlier this year said it’s spinning off its keno and lottery operations into a new public company.

An estimated valuation hasn’t yet been assigned to the Tabcorp unit.

Scientific Games mulling the Sydney listing of SG Lottery could also be a sign it’s not satisfied with others for the business it may be receiving from rumoured suitors.

Private equity firms Apollo Global Management, Carlyle Group and TPG Capital are said to be considering bids for SG Lottery.

But no offers have been made public as of yet.

Fund managers and would-be suitors alike could find SG Lottery compelling from a fundamental perspective.

That’s because the business is profitable, growing and proved resilient during the coronavirus pandemic.

In a revealing look at the business released in late September, Scientific Games said the lottery segment will sport a compound annual growth rate of 13.6 per cent through 2022.

In addition to controlling more than two-thirds of the global instant lottery market, SG Lottery also has a 13 per cent share in the still nascent but fast growing internet lottery segment, according to the parent company.

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