The year 2021 might be known as the Year of the Deal.
Every week, it seems, a major deal is announced. This week has been no exception. as Scientific Games announced an agreement to sell its lottery business for $6.05 billion to Brookfield Business Partners, a division of Brookfield Asset Management. The Canadian investment firm runs an estimated $626 billion in assets in its portfolio.
The sale will be transformative for Sci Games by allowing it to 1.) provide cash to go from debt-laden to balance sheet-strong; 2.) completing the process of bringing coherence to the mish-mash of merged entities created by years of acquisitions; and 3.) most importantly, focusing as a games company, including and especially in the vast and fast-growing digital world, both gambling and non-gambling.
The sale announcement comes days after Aristocrat announced its own big deal, the purchase of U.K.-listed online gaming technology company Playtech. The purchase gives Aristocrat the technology to play in the digital supplier space, the lone major gaming technology segment from which it has been absent, and one especially important to capitalize on the online and sports betting explosion in the U.S.
As everyone knows, Aristocrat has been something of a gaming MBA school for Scientific Games as its executives went to Sci Games and now lead the company, headed by Executive Chairman Jamie Odell, former Aristocrat CEO.
As such, it’s no surprise that the new Sci Games is now closer strategically to Aristocrat.
A note to investors: Given that most investors in Sci Games and Aristocrat were attracted to them as suppliers to the casino industry, it’s understandable if that’s their focus in analyzing these companies. But the changes made at both Aristocrat and Sci Games have created companies that are now much broader in product line, opening far bigger addressable markets, yet doing it with greater coherence—as games and game technology companies.
Jason Ader Does It Again
The Playtech deal was just the first for Jason Ader.
Days later, Ader announced that his SPAC, 26 Capital Acquisition, is merging with Okada Manila, the Philippine casino developed and owned by Universal Entertainment, which will continue as majority owner after listing on Nasdaq.
The appeal to Okada Manila has got to be not only confidence in its development as a successful mega-resort but a belief that Entertainment City in Manila can grow into an international gaming destination. Given competition from other nations such as Korea and Vietnam and whatever policies continue to evolve in China, it is at least an interesting proposition.
Lorne Does It Again
Thinking of Scientific Games reminds me of Lorne Weil and what he is accomplishing at Inspire Entertainment.
It is now a matter of nearly ancient history that $8 billion market cap Scientific Games began as Autotote, a small company based in Newark, Delaware, that provided totalisators to racetracks.
Led by CEO Lorne Weil, Autotote bought a small company that specialized in creating and supplying instant ticket games to lotteries—Scientific Games—and immediately took on the name of the acquired company.
From there, Sci Games grew into a lottery operator, slot machine company, provider of gaming machines to UK betting shops and pubs and, after Weil left, to a gaming conglomerate thanks to mergers involving Bally’s, WMS and Shuffle Master, the ungainly combination currently being streamlined, as mentioned above.
A few years ago, Weil acquired U.K. virtual sports provider Inspired Entertainment and took it public in the U.S. Now, Inspired is a diversifying games and technology company in brick-and-mortar and digital, and it’s growing significantly. The stock has been hitting new highs, and the market cap is approaching $500 million.
The latest boost to the stock has come from a high-profile marketing and trade mark deal with the Major League Baseball Players Alumni Association.
Lorne explains, with a note of humor, how he’s building Inspired by replicating lessons applied in building Scientific Games, in this brief video interview.
