Brookfield Nearing Deal for Scientific Games’ SG Lottery Unit

Posted on: October 27, 2021, 09:13h. 

Last updated on: October 27, 2021, 02:49h.

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

Private equity firm Brookfield is reportedly drawing closer to a deal for Scientific Games’ (NASDAQ:SGMS) SG Lottery division.

SG Lottery
A man holds a handful of Powerball lottery tickets, above. Scientific Games may be close to selling SG Lottery to Brookfield. A decision could be imminent. (Image: New York Post)

With over $625 billion in assets under management, Toronto-based Brookfield is one of the world’s largest alternative asset managers. It recently emerged as a contender for SG Lottery, joining rival Apollo Global Management (NYSE:APO) as the leaders to acquire the business, assuming Scientific Games opts for a sale.

The company owned by Scientific Games has been subject to a dual track process involving either a sale to a trade buyer or an initial public offering on the Australian Securities Exchange,” reports The Australian.

Unidentified sources close to the matter told the publication that Brookfield is “firming” as the buyer for SG Lottery.

Scientific Games Decision Could Be Imminent

A decision on the fate of the highly profitable, cash flow-generating SG Lottery business could arrive soon. Last week, reports emerged that Scientific Games could decide whether or not to move forward with the Australia initial public offering (IPO) as soon as the weekend.

That didn’t happen, stoking speculation the Las Vegas-based slot machine manufacturer is weighing offers from suitors, including Brookfield. It’s not yet known what Brookfield or any other prospective buyer is offering for SG Lottery. But Scientific Games recently trimmed the size of the IPO, should it move forward, indicating it’d raise up to $3.14 billion in such a transaction, implying a market capitalization of around $6 billion.

In June, Scientific Games revealed plans to shed SG Lottery and its OpenBet sports wagering arm as part of debt reduction efforts. At that time, the company said those deals could arrive through IPOs, a merger with a special purpose acquisition company (SPAC), or an outright sale or combination with another firm.

OpenBet was subsequently sold for $1.2 billion in cash and stock to Endeavor Group Holdings, Inc. (NYSE:EDR) and it’s believed Scientific Games may have a preference for a “cleaner” transaction — meaning an outright sale — with SG Lottery, according to The Australian.

Maybe Another Miss for Apollo

If Brookfield is successful in acquiring SG Lottery, or if Scientific Games moves forward with the Sydney IPO, it’d represent another swing and a miss on a gaming asset for Apollo.

In recent months, the private equity giant has been tied to numerous gaming asset sale and takeover rumors, including the Cosmopolitan on the Las Vegas Strip, William Hill’s international business, and Australia-based Tabcorp’s media and sports wagering unit. The first two were sold to other buyers, while Tabcorp opted to retain those units.

Apollo has some lottery exposure via a financing arrangement with Czech lotteries company Sazka Group and is rumored to have previously examined the SG Lottery businesses. To be fair, the private equity firm also has its share of successes in purchasing gaming assets, including Venetian, Palazzo, and Sands Convention Center on the Strip, Great Canadian Gaming Corp., and an Italian sports wagering business.