Private equity firm Apollo Global Management (NYSE:APO) is reportedly considering making an offer for Scientific Games’ (NASDAQ:SGMS) lottery business.
The rumor surfaces as Apollo was bested in its quest to acquire William Hill’s international businesses, assets 888 Holdings is purchasing from Caesars Entertainment (NASDAQ:CZR).
In June, Las Vegas-based Scientific Games said it’s selling its lottery management and sports wagering units, and that those divestments could arrive in a variety of forms. Those include an initial public offering (IPO), a merger with a special purpose acquisition company (SPAC), or an outright sale or a combination with another firm.
Apollo has some lottery exposure via a financing arrangement with Czech lotteries company Sazka Group, and is rumored to have previously examined the SG Lottery businesses, reports The Australian.
Speculation Swirling About Scientific Games Lottery Plans
Scientific Games is parting with the SG Lottery unit and the Don Best sports betting platform in an effort to pare debt, an effort that’s earning praise on Wall Street.
Since the gaming device manufacturer made the announcement in late June, speculation swirled regarding the fate of the lottery business. Those rumors include the possibility that Scientific Games could list the business in Australia. It’s believed the Sydney listing is a viable option for the SG Lottery operation, and that management could commence an IPO roadshow later this month.
Apollo is unlikely alone in its SG Lottery interest. The Australian reports rival private equity firms Carlyle Group and TPG Capital may also be mulling bids for the business.
SG Lottery, which provides the systems used to generate Mega Millions and Powerball tickets, generated $430 million in earnings before interest, taxes, depreciation and amortization (EBITDA) for the 12 months ending June 30. Analysts estimate its IPO valuation could be more than 10 times that figure. Investment bank Jefferies previously said an SG Lottery IPO could be valued at $3.44 billion to $5.16 billion. That could unlock significant value for Scientific Games shareholders, as the company currently sports a market value of $7.13 billion.
Apollo Hungry for Gaming Assets
The SG Lottery rumor is the latest involving Apollo and a wagering business. As noted above, the investment firm missed out on William Hill’s international assets after trying to acquire the sportsbook operator outright late last year.
The private equity firm was also in the mix for Tabcorp’s media and sports betting businesses before the Australian gaming firm opted to retain those operations and spin-off its keno and lottery outfits.
The latest large-scale speculation involving Apollo is that it could be a suitor for the Cosmopolitan Las Vegas, as counterpart Blackstone (NYSE:BX) is said to be shopping that venue at a price tag of $5 billion or more.
While Apollo has some recent misses in the gaming space, it’s also been successful in acquiring some assets, including Venetian, Palazzo, and Sands Convention Center on the Strip, Great Canadian Gaming Corp., and an Italian sports wagering entity.