Scientific Games Corporation has revealed that it intends to divest its sports betting and lottery businesses as part of a strategic review of the business.
The company says that cashing in on those two elements will help address its balance sheet, free up investment capacity, and create an organization with a “materially increased focus on digital markets”.
Ultimately, Scientific Games will move forward with a model comprised of the three units of Gaming, iGaming, and SciPlay and aim to capitalize on increasing convergence of these arms.
Barry Cottle, President and CEO, said that Scientific Games intends the result of this move to be the growth of its digital offerings to be “comparable in size to the land-based gaming business within three years.”
The company is evaluating strategic alternatives to execute the divestitures for sports betting and lottery, including an initial public offering (IPO), a combination with a special purpose acquisition company (SPAC), or a sale or a strategic combination with another business.
Executive Chair Jamie Odell noted: “When I joined the Board in September 2020, I told stakeholders that we were focused on rapidly de-leveraging the balance sheet, unlocking the value of the company’s products and technologies and creating a flexible, nimble company positioned to deliver above-market returns to investors. Today, we have announced major initiatives aimed at achieving each of these key objectives, recognizing significant value in each of the businesses and positioning the company for sustainable growth, all as a result of the dedicated work of our teams.”
Odell added in a statement to investors that Scientific Games’ ultimate goal is “to unlock the tremendous value of each of the individual businesses and to turn Scientific Games into a sustainable growth company with a transformed balance sheet and an enhanced focus on industry-leading content.”
According to Odell, Scientific Games lottery and sports betting businesses will be best positioned for the future as independent businesses with their own capital structures and investment strategies.
In May, Scientific Games reported a year-on-year increase in revenue and declining losses in the first quarter of 2021. Growth in its lottery segment, as well as digital and social gaming, helped to offset a drop in gaming machine sales over the three months to March 31, with group revenue up 0.6 per cent to $729m.
Cottle added: “Our company will be positioned to build great games that define the future of gaming, supported by platforms that power the best operators in the world. We believe these steps will enable us to capitalize on the high growth potential of each of our businesses, including their expanding digital content offerings and platforms, unlocking value for shareholders, customers, and employees. Each of our businesses will be better positioned to partner with their respective customers and to deliver long-term growth and profitability.”
In closing, Scientific Games said there can be no assurances that its exploration of alternatives for its lottery and sports betting businesses will result in any transactions or other actions by the company.