Scientific Games Corporation has revealed plans to divest its sports betting and lottery businesses as part of a strategic review of the business. Cashing in on those two elements will, said the firm, help deleverage its balance sheet, free up investment capacity and create an organization with a “materially increased focus on digital markets”.
At the conclusion of the process, the newly strategized company will comprise three units; Gaming, iGaming and SciPlay, with a view to capitalizing on the increasing convergence of those businesses
In the announcement, made with the support of its Board of Directors, including Executive Chair Jamie Odell and Executive Vice Chair Toni Korsanos, SG said it is evaluating strategic alternatives to execute the divestitures for sports betting and lottery, respectively.
Those options include an initial public offering (IPO) or a combination with a special purpose acquisition company (SPAC), or a sale or a strategic combination with another business.
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.”
Barry Cottle, President and CEO, added: “Today’s announcement reflects key steps to optimize 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.
“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.”
Talking in more detail about the rationale behind the new strategy, Odell told investors: “Our 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.
“We outlined three key strategic pillars to unlock this value. Firstly, optimizing our portfolio to focus on driving our key areas of differentiation in content and in digital channels where total addressable markets are large, profitable and fast growing.
“Secondly, investing in our largest growth opportunities – both organically and inorganically – to become a sustainable growth company. And thirdly, significantly de-levering, transforming our balance sheet to enhance our financial flexibility and capacity to invest in our future.”
According to Odell, SG’s lottery and sports betting businesses will be best positioned for the future as independent businesses with their own capital structures and investment strategies.”
He advised: “We are confident that separation of these businesses will provide their respective strong management teams with the best foundation to build on their current momentum and capitalize on the strengths of their business. We expect this to create exciting opportunities for their employees and customers. We will be exploring ways to work with those businesses in key areas following the divestitures.”
In closing SG cautioned that 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.