Scientific Games proposes to acquire public shares of SciPlay

SG expects its digital business to equal land-based within 3 years.

Scientific Games Corporation on Thursday said it has submitted to the board of directors of SciPlay Corporation a proposal for SG to acquire the remaining 19% equity interest in SciPlay that it does not currently own in an all-stock transaction.

If the deal is completed, SciPlay would become a wholly-owned subsidiary of Scientific Games.

According to a statement released by Scientific Games,this proposed transaction would be“another important step forward on the strategy recently announced to become a content-led growth company with a particular focus on digital markets and unlock the value of the company’s products and technologies.”

SG added SciPlay “fits perfectly” into Scientific Games’ focus on building engaging content and “launching great games more fully cross-platform.”

SciPlay will be a key component in SG’s goal of growing its digital business to be comparable in size with its land-based business within 3 years, Scientific Games said.

Scientific Games expects the transaction to be immediately accretive to the value of the company’s shares. SG said the proposal offers SciPlay shareholders a premium for their investment and the opportunity to participate in the upside potential of Scientific Games as it transforms its portfolio and executes on its strategy to drive long-term sustainable growth and significant shareholder value.

SG unveiled the text of the proposal letter it sent to SciPlay’s board. It said SciPlay shareholders, other than SG and its subsidiaries, would receive 0.250 shares of SG common stock for each share of SciPlay Class A common stock they own, which would imply an enterprise value of $1.9 billion and purchase multiple of 2021E consensus EBITDA of 10.1x and 2022E consensus EBITDA of 9.4x.

The letter said the transaction implies a premium of 11% based on the SG and SciPlay respective closing stock prices as of the close of business on July 14, 2021, the last trading day prior to the proposal, and a premium of 10% based on the thirty-day volume weighted average price for SciPlay Class A common stock.

“We believe a merger of SGMS and SciPlay will deliver significant operational, strategic and financial benefits and drive shareholder value in excess of what each company could generate on a standalone basis,” the letter said in part. “Further, we believe SciPlay public shareholders will benefit from increased trading liquidity as a result of being part of a pro forma entity with a market capitalization of $7.0 billion (based on the closing share prices of SGMS and SciPlay on July 14, 2021) and a public float that would be approximately 18x larger than SciPlay today.”

Michael Bartlett

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