SciPlay Forms Committee to Consider Scientific Games Takeover Offer

Posted on: August 11, 2021, 11:34h. 

Last updated on: August 11, 2021, 01:37h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Social casino developer SciPlay Corp. (NASDAQ:SCPL) said its board of directors formed a special committee to evaluate a takeover offer presented last month by former parent company Scientific Games (NASDAQ:SGMS).

SciPlay bid
A slide from a 2019 SciPlay investor deck, shown above. The company formed a committee to evaluate Scientific Games’ takeover offer. (Image: Seeking Alpha)

On July 15, Scientific Games offered to acquire the 19 percent of the digital games developer it doesn’t already own at an 11 percent premium to the target’s July 14 closing share price. Previously, the social gaming division of Scientific Games, SciPlay was spun off from that company in 2019.

The committee is comprised of independent directors Gerald Cohen, Michael Marchetti, and William Thompson.

The Board has granted the Special Committee independent authority to review and evaluate a previously announced proposal that the Board received on July 15, 2021 from Scientific Games Corporation,” according to a statement issued by SciPlay.

Related to its evaluation efforts of the Scientific Games bid, the committee retained investment bank Lazard as an advisor, and Sullivan & Cromwell LLP as its legal counsel.

In SciPlay Takeover, No Drama Yet

When Scientific Games reported second-quarter results on Monday, it reiterated that its offer for SciPlay remains on the table. But it didn’t offer much more commentary on the matter.

That could be a sign that, at least for now, there isn’t much drama surrounding the takeover effort. Upon revealing its bid last month, Scientific Games did, however, make clear that it only favors its offer to SciPlay, indicating it’s unlikely to consider other offers for the target should such bids emerge.

Las Vegas-based Scientific Games has some leverage in the matter. Not only does it own 81 percent of SciPlay’s common equity, it controls 98 percent of the voting stock as well. Given those percentages, it’d be difficult for another suitor to acquire SciPlay unless the offer was well in excess of the Scientific Games pitch. Still, the SciPlay board is telling investors to be cautious.

“The company cautions its shareholders and others considering trading in its securities that neither the Board nor the Special Committee has made any decision with respect to the Company’s response to the Proposed Transaction,” said SciPlay in the statement. “There can be no assurance that any definitive offer will be made, that any definitive agreement will be executed relating to the Proposed Transaction, or that this or any other transaction will be approved or consummated.”

Digital Gaming Consolidation Heating Up

Scientific Games is in the process of divesting its lottery and Don Best sports wagering businesses to focus on digital/online gaming. Acquiring SciPlay outright jibes with that objective.

With iGaming taking off and expected to deliver exponential growth over the next decade, consolidation in the industry is heating up. On Monday, DraftKings (NASDAQ:DKNG) announced it’s buying Tilman Fertitta’s Golden Nugget Online Gaming (NASDAQ:GNOG) for $1.56 billion in stock, stirring talk that a wave of mergers and acquisitions activity is coming to the internet casino market.

SciPlay games aren’t traditional casino fare, such as blackjack or slots. Rather, the company’s games are free-to-play, but come with in-app purchases. That’s a lucrative market for providers, as data confirms revenue from in-app buys is growing faster than advertising sales.