Gaming supplier Scientific Games Corp. announced last week that its largest shareholder, billionaire Ronald Perelman, has agreed to sell the bulk of his stake in the company, 34.9 percent of all shares, to Australian investment firm Caledonia for $28 per share.
As of July, Perelman held approximately 36.8 million shares through his investment company McAndrews & Forbes, making the deal worth over $1 billion. In consideration of the sale, Scientific Games terminated its stockholders agreement with McAndrews & Forbes.
Along with the ownership shift is a reconstitution of the company’s board of directors, which will now be led by former top executives of SG rival Aristocrat Leisure Limited. Former Aristocrat CEO Jamie Odell, who has been serving Scientific Games for a year as an adviser to CEO Barry Cottle, replaces Perelman as executive chairman of the board. Toni Korsanos, formerly Aristocrat’s chief financial officer, was named executive vice chairwoman.
“Scientific Games is well-positioned for future success, given our industry-leading portfolio of products and technologies, loyal customer base and talented leadership team,” Cottle said in a statement. “We are pleased to have the support of our refreshed board and new investor base as we continue to execute on our strategy to drive meaningful long-term growth and shareholder value creation.”
The Scientific Games board will include all existing directors, other than the MacAndrews & Forbes representatives, as well as three new directors—Odell, Korsanos and an additional independent non-executive director. Perelman and McAndrews & Forbes representatives Barry Schwartz and Frances Townsend will resign from the board.
The board will now comprise a majority of independent directors with a deep and diverse mix of gaming industry, financial, strategic and operational experience.
During Odell’s tenure as CEO of Aristocrat from 2009 to 2017, Aristocrat’s market capitalization increased from $1.3 billion to approximately $7.5 billion and achieved leading market share positions in digital, Class II and Class III gaming.
“I am excited to become the executive chair of Scientific Games and work alongside the company’s world-class leadership team at such an important time for both the company and the broader gaming industry,” Odell said in a statement. “The company possesses a market-leading portfolio of products and a differentiated position in the emerging digital gaming and sports betting industries.
“Scientific Games will have the support of a highly credentialed and experienced investor base, including Caledonia, as we implement transformative initiatives to optimize the asset portfolio and unlock the full potential of the company’s best-in-class collection of products and technologies. We will be highly focused on rapidly de-leveraging the balance sheet and creating a flexible, agile company that is poised to capitalize on evolving industry and macroeconomic trends to deliver outsized returns to investors.”
“Jamie is a true leader and visionary in gaming,” said Cottle, “and has been a trusted adviser to the company and the Scientific Games board. I am thrilled to partner with Jamie and Toni to shape a bright future for Scientific Games. Their support is a testament to the faith they have in our business and team. I want to thank Ronald and MacAndrews & Forbes for their support since 2003 and Barry and Fran for their contributions as directors.”
The elevation of Odell and Korsanos completes what may be called the Aristocrat connection at Scientific Games. Matt Wilson, the longtime Aristocrat executive who left last year as president of the Americas, recently took over as group chief executive of the company’s gaming division. He named Rich Schneider, former chief product officer of Aristocrat, to the same role at Scientific Games. Schneider will join the company next year after waiting out a non-competition agreement.
“As gaming industry revenues continue to recover, we believe Scientific Games is poised to benefit from a renewed wave of growth given our position at the forefront of the rapidly expanding digital gaming and sports betting ecosystem and our vast portfolio of original content and licensed brands,” said Cottle. “We are committed to maintaining our position as the preferred partner to the leading casino and sports betting operators across the United States and around the world by delivering unparalleled customer service and continuing to innovate our leading technology and product portfolio.”
The sale is being conducted in several tranches, and the result will be that no individual investor will own more than 9.9 percent of the company as a result of the transaction, which is expected to be completed over the next several weeks. The changes to the Scientific Games board become effective upon the first tranche sale.
Founded in 1992, Caledonia is a global investment management firm and has a concentrated, high conviction and long-term investment approach. Caledonia has significant and deep experience in the global gaming sector, including a US$2.5 billion shareholding in Flutter Entertainment currently. Over the last 15 years, Caledonia has had significant investments in Aristocrat, including being the largest institutional shareholder for much of the last five years. Caledonia’s other current gaming investment is DraftKings.
Scientific Game shares jumped 39.3 percent after the announcement last Monday, September 14, and were up another 14.7 percent the following day. Union Gaming placed a “buy” rating on the stock, and raised its price target from $27 to $38.
“We view the announcement as a clear positive for Scientific Games stakeholders,” said Stifel Financial gaming analyst Brad Boyer, according to CDC Gaming Reports.
Truist Securities gaming analyst Barry Jonas said Caledonia helped facilitate Flutter’s merger with Stars Group earlier this year.
“Caledonia has historically had a long-term focused investment strategy, with a noted willingness to weather market volatility for high conviction ideas, one being online gaming as a global growth theme,” Jonas told CDC. “Caledonia also has a history of shareholder-friendly activism.”
David Katz of Jefferies said the change in leadership gives SGMS a chance to review its corporate structure and financial alignment and that adding Aristocrat veterans Jamie Odell and Toni Korsanos can accelerate what he called the “retooling.”