Scientific Games Agrees to Sale of Lottery Business

Scientific Games has agreed to sell its signature lottery business to Brookfield Business Partners LP and its institutional partners for $6.05 billion, part of SG’s plan to evolve into a content-only company. The lottery arm, which dates to 1973, serves 130 lotteries in more than 50 countries.

Scientific Games Agrees to Sale of Lottery Business

Scientific Games Corp. has entered into a definitive agreement to sell the lottery business on which the company was founded to Brookfield Business Partners for a total consideration of $6.05 billion.

It is the second and final divestment in the plan, announced last summer by company President and CEO Barry Cottle, to shed the company’s lottery and sports betting businesses to concentrate on its core business of providing content to both land-based and online casinos. In September, the company entered into a definitive agreement to sell its sports betting business, OpenBet, to Endeavor Group Holdings, in a cash and stock transaction valued at $1.2 billion.

Under the agreement, Brookfield and its institutional investors will pay $5.825 billion in cash for the lottery business, and an earn-out of up to $225 million based on the achievement of certain EBITDA targets in 2022 and 2023. The transaction is expected to close in the second quarter of 2022, subject to applicable regulatory approvals and customary closing conditions.

Scientific Games was founded in Alpharetta, Georgia in 1973 to supply state and provincial lotteries in the U.S. The company, originally part of parimutuel supplier Autotote, introduced the first instant lottery ticket in 1974. Today, it supplies 130 government and non-government lotteries in more than 50 countries across the world with tickets, systems and other lottery services.

SG’s lottery division provides a suite of turn-key solutions covering the entire lottery ecosystem, including instant and terminal-generated lottery games, sports betting, lottery systems and retail technology and the fast-growing iLottery market. The lottery business is the market leader in instant games with a broad array of products and services powering approximately 69 percent of instant product retail sales globally.

“This transaction is transformative in accelerating the delivery of our stated strategy to optimize our portfolio, aggressively de-lever our balance sheet and position us to invest in future growth,” said Cottle in a statement.

“We conducted a thorough review of paths to divest the lottery business, and we are confident that this transaction maximizes value and certainty while minimizing complexity and execution risk, and positions both Scientific Games and SG Lottery for continued success along their unique growth trajectories.

“The significant near-term proceeds from this transaction as well as our previously announced sale of sports betting will transform our balance sheet and provide the financial flexibility to invest organically and inorganically to accelerate our strategies. This marks a major milestone and puts us on a clear path to achieve our vision to become the leading cross-platform global game company and unlock our full value for shareholders.”

“We are thrilled with this outcome and what it means for the future of Scientific Games Lottery and our customers,” said Patrick McHugh, chief executive of Scientific Games Lottery. “I am confident that, with Brookfield’s support, we will have the flexibility and agility to expand our deep product portfolio to meet our customers’ evolving needs and maximize lottery beneficiary proceeds across the globe, enabling us to capture the significant opportunities we see ahead.”

“The Scientific Games Lottery team has built a leading business, which has innovated its industry, at the convergence of games, technology and services, across retail and digital channels for its global customers,” said David Nowak, managing partner, Brookfield Business Partners. “With our capabilities and global reach, we look forward to supporting management in the continued growth of the business.”

SG Lottery will remain headquartered in Alpharetta, in the metro-Atlanta area, with operations expected to continue around the world.

SG Lottery has entered into a transitional services agreement with Scientific Games Corporation whereby Scientific Games will provide SG Lottery certain finance, information technology, regulatory compliance, legal, human resources and facilities at cost for an initial term of 12 months.

Scientific Games had been in discussions with Apollo Global Management as well as Brookfield in its search for suitors interested in buying the SG lottery business, which had been valued at up to $7.5 billion.