Scientific Games Corporation (NASDAQ: SGMS) announced on Thursday the sale of its lucrative lottery business to Canada’s Brookfield Business Partners L.P. in a definitive agreement valued at $6.05 billion; a mostly cash sale. The worldwide lottery giant said the deal is expected to be consummated in the second quarter of 2022.
Brookfield is a Canadian business listed on the Toronto and New York stock exchanges (NYSE:BBU) (TSX:BBU.UN) with an asset management portfolio some one-hundred times larger than its latest acquisition.
Scientific Games Lottery (SG Lottery) has business in place with over 130 government and non-government lottery entities in over 50 countries and is the world’s largest supplier of instant win lottery games.
Serves the Entire Lottery Ecosystem
In addition to scratch tickets and other instant win games, the company also provides terminal-generated predictive and instant win games, sports betting solutions, entire lottery systems, iLottery sales, and retail lottery systems and support. The company estimates that SG Lottery provides the services and products for nearly 70% of all instant win games in the world.
The behemoth is offloading the lottery end of its business in order to focus more on capturing more of the cross-platform global gaming business. The cash infusion of $5.825 billion and expected premiums of up to $225 million based on the asset’s certain EBITDA targets in 2022 and 2023 should provide plenty of fuel to accelerate the company’s goals and provide the flexibility to invest in growth of its target markets.
Stock was down about 8% on the day with an October 27, 2021 market cap of $8.58B. At the height of the world health emergency the company’s market cap fell to about $560m, according to the MacroTrends website.
Long Relationship with Canada
Scientific Games celebrated a fifty-year anniversary with Loto-Québec earlier this year with a one-year extension on their existing 7-year contracts with the Crown Corporation. Scientific Games’ Montreal, Quebec manufacturing facility develops and creates games for LotoQuébec as well as four other Canadian provincial lotteries. Among the more than 4,500 games they have created for Loto-Québec are the popular Ultime, La Poule aux Oeufs d’Or, and Boîte à Bingo.
Patrick McHugh, Chief Executive of Scientific Games Lottery said of the development: “We are thrilled with this outcome and what it means for the future of Scientific Games Lottery and our customers,” He added, “I am confident that, with Brookfield’s support, we will have the flexibility and agility to expand our deep product portfolio to meet our customers’ evolving needs and maximize lottery beneficiary proceeds across the globe, enabling us to capture the significant opportunities we see ahead.”
David Nowak, Managing Partner, Brookfield Business Partners related: “The Scientific Games Lottery team has built a leading business, which has innovated its industry, at the convergence of games, technology and services, across retail and digital channels for its global customers. With our capabilities and global reach, we look forward to supporting management in the continued growth of the business.”
Scientific Games will remain headquartered in Atlanta, Georgia and provide services at a cost to Brookfields for a 12 month period.
Source: Scientific Games Announces Sale of Lottery Business to Brookfield Business Partners for $6.05 Billion, Scientific Games, October 27, 2021