Scientific Games Corp., now doing business as Light & Wonder, Inc., announce the completion of its divestiture of the lottery business on which Scientific Games was founded in the 1970s. L&W completed the sale of its lottery business to Brookfield Business Partners LP, which will continue to use the Scientific Games brand for the well-known lottery supplier.
The sale, for $5.8 billion in gross cash proceeds and approximately $5 billion of net after-tax cash proceeds, fulfills the former Scientific Games’ stated objective of divesting all but its core omnichannel games business. Last year, the company announced the sale of its sports betting division, OpenBet, to Endeavor Group Holdings for $1.2 billion. That transaction will close soon.
“After another record year, this is a significant step forward for the lottery business, positioning it to accelerate growth as a stand-alone company with a singular focus on its lottery customers,” the company said in a press release. “With the net proceeds from the sale of the lottery business, Light & Wonder is executing a balanced and opportunistic approach to capital allocation, as communicated in its fourth quarter 2021 earnings call.”
The company listed three priorities in the wake of that earnings call:
- Debt reduction to a target net debt leverage ratio range of 2.5x to 3.5x: The company plans to use the net proceeds from the sale of the lottery business to pay down approximately $5 billion of its existing debt, by reducing and refinancing its SGI Term Loan B-5 and paying off certain outstanding notes.
- Share buy-backs to generate capital: The company recently announced the authorization of a three-year, $750 million share repurchase program. Since the announcement, the company has been actively repurchasing shares, reflecting its strengthened balance sheet, the recurring nature of its revenue, strong cash flow generation and the value in its shares.
- Investment in growth opportunities: The company will prioritize using its capital for buy-backs, debt reduction and organic investments unless convinced that M&A activity will deliver greater long-term shareholder value than other uses of the company’s capital.
“The lottery business sale closing is a significant step towards streamlining our portfolio and strengthening our balance sheet as we execute on our strategy to transform our business with a singular focus on building great games and franchises to entertain our players wherever and whenever they want to play.” said L&W CEO Barry Cottle.
“The convergence of land-based and digital continues to gain momentum, and we are strongly positioned to be a leader in the industry. With the completion of the lottery business sale and the upcoming sale of our sports betting business, we are moving rapidly as we execute on our vision to be a leading cross-platform global game provider and unlock the full potential of Light & Wonder. This also positions the lottery business for success as a stand-alone company completely focused on innovating for its global lottery customers.”
“The proceeds from this transaction and our strong cash profile allow us to accelerate progress on our capital allocation strategy,” said Light & Wonder Chief Financial Officer Connie James. “We now have the financial flexibility and balance sheet integrity that, combined with our double-digit growth profile and high mix of digital and recurring revenues, give us a tremendous opportunity to continue to drive shareholder value.”
