Looking to buy the remaining shares

Scientific Games (SG) Corporation has revealed its plan to acquire the remaining 19% equity stake in SciPlay Corporation that it does not own, at an implied enterprise valuation of $1.9bn.

SciPlay would then be a wholly-owned Scientific Games subsidiary

The Las Vegas-based gaming company announced on Thursday that it has submitted a proposal to the SciPlay board of directors to buy the remaining equity in an all-stock transaction. If the merger deal is successful, SciPlay would then be a wholly-owned Scientific Games subsidiary.

SciPlay is a developer of social casino games, tradable on the Nasdaq stock exchange since 2019 when it became an independent business. Scientific Games currently owns about 81% of SciPlay’s economic interest, as well as 98% of the voting interest.

As part of the proposed deal, SciPlay shareholders would get 0.25 shares of Scientific Games common stock for each SciPlay Class A common stock they hold. This would mean an 11% premium on the respective closing prices of the two companies on July 14, 2021.

A range of potential benefits

Scientific Games believes that the proposed merger agreement would lead to significant financial, strategic, and operational benefits. It would also create higher shareholder value and more liquidity for investors. Scientific Games is confident that due to the existing collaboration, the acquisition of SciPlay would be a seamless process.

mission of bringing its online business up to a similar size as that of its land-based business

Scientific Games is hoping to be a leading worldwide cross-platform gaming company. It wants to leverage SciPlay’s game mechanics and content to create a better experience for players both online and at land-based facilities. SciPlay will be a part of Scientific Game’s mission of bringing its online business up to a similar size as that of its land-based business in the next three years.

Scientific Games believes that the proposed acquisition would provide certainty and speed for SciPlay’s public shareholders.

The company will not be conducting any due diligence and does not foresee any need for a Scientific Games shareholder vote or regulatory approval for the deal. It believes that the board of directors at SciPlay will create a special committee of independent directors to consider the proposal.

As part of the proposal, Scientific Games CEO and president Barry Cottle said the company thought it appropriate “to publicly disclose our proposal substantially concurrently with the delivery of this letter” to SciPlay’s board of directors.

Turning its focus to digital

Following a strategic review, Scientific Games revealed in June its plans to focus on growing its digital business. As part of this plan, it will be divesting its sports betting and lottery businesses. The move will strengthen the company’s balance sheet and provide the financial capacity to invest in bigger growth opportunities.

Scientific Games is currently considering different options for the divestments, including a sale, initial public offering, or a merger with a special purpose acquisition company (SPAC). The move to grow its digital business comes in light of the company’s land-based business struggling during the pandemic.

In Q4 2020, land-based revenue fell 36% year-on-year to $286m, while digital revenue for the same period was $73m, up 1%. The land-based struggles continued in Q1 2021, reporting a 23% year-on-year drop in the division’s revenue. However, this was the sole business segment to see a decline for the period. Digital revenue continued its upward trend, rising 12% year-on-year in Q1 2021 to $86m.

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