Scientific Games to retain minority interest in lottery division if IPO materialises

Scientific Games is looking to divest the majority of its ownership stake in its SG Lottery business following the conclusion of a company-wide strategic review. The supplier has published a proposal to turn its SG Lottery business into a public-listed entity via a potential IPO of shares in the firm. An IPO is one of three potential options being explored to sell the division. Alternative proposals under consideration include an outright sale or a combination with a SPAC. Earlier this month, the firm publicly disclosed its long-term strategy and details of its top lottery contracts as part of an attempt to solicit bids from “certain interested parties”. “If an initial public offering of SG Lottery is consummated, we expect to hold no more than a minority equity interest in the entity that owns SG Lottery, but the amount of such minority equity interest is uncertain at this time,” Scientific Games said in an accompanying statement. In preparation for a potential IPO, the Las Vegas-headquartered firm has begun to solicit consent from senior secured notes holders, who control much of the firm’s credit. This includes amendments to existing indenture requirements that at least 75% of a consideration received from the sale of assets is made up of cash or cash equivalents. Under the amendments, this percentage would be reduced to 60%, allowing for an IPO to take place. Scientific Games has said the main purpose in securing this approval is to allow the supplier to provide “greater flexibility” in the equity interest offered as part of an IPO, should it elect to go down this route. The solicitation process ends on 30 September, although the business can still proceed with an IPO if the required amendments to indentures are not made. The proposal is that Scientific Games completes its lottery division IPO by no later than 30 June 2022. If the deadline passes, any amendments made to existing indentures would become void. Proceeds from the IPO would be used to deleverage its balance sheet, with a “substantial” majority of the proceeds used to pay off debts held by the wider Scientific Games group. “SGMS does not intend to pay any dividends, or make any repurchase of its equity, with the net proceeds from an SG Lottery transaction, nor does it intend to distribute any retained interests in SG Lottery to its shareholders (as a dividend or otherwise),” Scientific Games added in a statement.