Scientific Games outlines plans to divest sports betting and lottery divisions

The gambling technology giant Scientific Games has announced plans to divest its lottery and sports betting businesses.

According to the announcement, the decision was made in an attempt to position the company for sustainable growth in the future.

Scientific Games to drop sports betting and lottery operations

Yesterday, the technology firm announced plans to divest its sports betting and lottery operations as a means to position the company for sustainable growth going forward.

Scientific Games said that it is in the process of exploring several options to help offload the divisions which include a sale, combination with another business, an IPO, or a merger with a special purpose acquisition company (SPAC).

Scientific Games has selected Macquarie Capital (USA) Inc. and Oakvale Capital LLP to serve as financial advisors, while Cravath, Swaine & Moore LLP to act as legal counsel.

Why is Scientific Games doing this?

In the announcement, executive chair Jamie Odell, and president and chief executive Barry Cottle explained the importance of reducing debt as a means to provide long-term stability.

Cottle explained that at the end of the process, the new business “will consist of leading Gaming, iGaming and SciPlay businesses.”

This suggests the firm plans to offload its sports betting assets which include the OpenBet platform, DonBest, trading services, and the SportCast bet builder business.

Cottle continued: “Given this significant opportunity, we are targeting our digital businesses to be comparable in size to the land-based gaming business within three years.

“Today’s announcement reflects key steps to optimize our portfolio and strengthen our balance sheet by significantly de-levering while also targeting investments in our largest growth opportunities. These steps will accelerate our path to become a content-led growth company focused on leading in both land-based and digital markets.”

According to Cottle, this will provide the business with the resources to expand its digital offerings and platforms, “unlocking value for shareholders, customers, and employees.”

Speaking on the decision, Odel said: “When I joined the Board in September 2020, I told stakeholders that we were focused on rapidly de-leveraging the balance sheet, unlocking the value of the Company’s products and technologies and creating a flexible, nimble company positioned to deliver above-market returns to investors. 

“Today, we have announced major initiatives aimed at achieving each of these key objectives, recognizing significant value in each of the businesses and positioning the Company for sustainable growth, all as a result of the dedicated work of our teams.”

Scientific Games’ financial performance

In its latest financial update from May, Scientific Games reported a year-on-year increase in revenue and a decline in losses for the first quarter of 2021.

The supplier noted growth in its lottery segment in addition to its digital and social gaming operations. This helped offset a drop in gaming machine sales for the three-month period ending 31 March 2021, with group revenue climbing 0.6% up to $729m.

Potential impact on US sports betting?

Scientific Games’ announcement could have a knock-on effect for the US sports betting industry where it supplies several operators.

In the US, Scientific Games supplies content and technology to FanDuel, Golden Nugget, WynnBet and Betfred.

It is possible that one of those operators, or even another online gambling business, may try to bring their technology in-house similar to when DraftKings acquired SBTech, or when Bally’s acquired Bet.Works to support its online sports betting ambitions.

Online giants Flutter Entertainment and Entain also use Scientific Games technology and acquiring the assets could bolster their offerings.