Scientific Games Reportedly Considering Australia Listing for Lottery Business

Scientific Games (NASDAQ:SGMS) is evaluating an Australian initial public offering (IPO) for the lottery business the company is planning to divest.

 

Last week, the gaming equipment manufacturer said it’s parting with the lottery unit and its Don Best sports wagering arm. It noted at the time the transactions could materialize in the form of an initial public offering (IPO), a merger with a special purpose acquisition company (SPAC), or an outright sale or combination with another firm.

 

Unidentified sources told The Australian Financial Review that Las Vegas-based Scientific Games is currently in talks with Australian investment banks regarding their thoughts on the lottery business and a possible listing on the Australian Stock Exchange (ASX).

 

While bankers said it was still very much in the pitching stage, the fact SciGames management is talking to Australian ECM teams is a strong indication it was considering the ASX-boards as a likely home for the lotteries unit,” reports the paper.

 

Scientific Games’ sports betting platform wasn’t mentioned in the article. That could be a sign the company is sticking with the plan of a possible SPAC deal, spin-off/IPO, or sale to another operator.

 

Not Surprising Sci Games Considering Australia

This isn’t the first time Scientific Games is being tied to Aussie IPO speculation. In May, reports surfaced the company was mulling an ASX offering as an avenue for raising cash to deleverage its balance sheets.

 

The slot machine manufacturer has ties to the country. For example, board member Jamie Odell is a well-respected Aussie gaming executive and previously ran rival Aristocrat for a decade. He’s also a part of Caledonia Investments, which last year purchased a $1 billion stake in Scientific Games from financier Ron Perelman.

 

Scientific Games’ Executive Vice-Chair Toni Korsano is also a former Aristocrat executive and is currently on the boards of Crown Resorts and Treasury Wine Estates — both Australian companies.

 

There hasn’t been talking of the broader Australia IPO since the rumor initially appeared in early May.

 

Lottery IPO Could Be Big Australia Deal

Should Scientific Games opt for listing its lottery unit in Sydney, it would likely be one of the largest non-privatization IPOs in the country’s history. It would be potentially larger than prior government-controlled deals, according to The Australian Financial Review.

 

The lottery unit generated $430 million in earnings before interest, taxes, depreciation and amortization (EBITDA) over the past 12 months. Analysts estimate it could fetch more than 10 times that as an IPO valuation.

 

“Jefferies analysts, in a note sent to global equities clients in Australia last week, valued the business at 8 to 12-times EBITDA, or $US3.44 billion to $US5.16 billion,” according to the paper.

 

The transaction could also be a template for Tabcorp, which earlier this week 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.