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Scientific Games (SGMS) to Sell OpenBet to Endeavor for $1.2B

Scientific Games SGMS is selling its sport betting business – OpenBet – to Endeavor EDR for $1.2 billion. Per a recent announcement, the company has entered into a definitive agreement with Endeavor under which it will receive $1 billion in cash and $200 million in Endeavor Class A common stock. The deal is expected to be completed by the second quarter of 2022.

OpenBet is a leading provider of sports content, technology and services with extensive partner base in the United States, U.K., Australia and Canada. The company has more than 75 global customers.

This deal follows Scientific Games’ restructuring strategy, which includes divestitures of the Lottery and Sports Betting businesses, as announced on Jun 29.

In second-quarter 2021, the Lottery segment accounted for 30.2% of revenues, increasing 27.3% year over year to $248 million, driven by higher instant retail game sales.

The company’s Digital segment, which offers iGaming, iLottery and sports betting solutions and services, accounted for 10.6% of revenues. Digital revenues increased 27.4% year over year to $93 million in second-quarter 2021.

Scientific Games Corp Price, Consensus and EPS Surprise

Scientific Games Corp Price, Consensus and EPS Surprise
Scientific Games Corp Price, Consensus and EPS Surprise

Scientific Games Corp price-consensus-eps-surprise-chart | Scientific Games Corp Quote

The latest deal will help Scientific Games deleverage its balance sheet in order to improve liquidity. Scientific Games had a total debt of $9 billion as of Jun 30, 2021 compared with $9.1 billion as of Mar 31, 2021.

As of Jun 30, the company had $1.44 billion in available liquidity, which included SciPlay’s revolving credit facility. Net debt leverage ratio was 7.2 times as of Jun 30, 2021.

Increased liquidity will help Scientific Games to invest in content and technology as well as enhanced monetization opportunities.

Scientific Games’ shares have rallied 100% year to date compared with the Zacks Computer Services return of 13%.

Accretive Acquisitions to Boost Top-Line Growth

Acquisitions have played an important part in Scientific Games’ growth story over the years. Earlier buyouts of Bally Technologies, WMS Industries, Parspro and Provoloto, Barcrest Group Limited, Sceptre Leisure Solutions, and GameLogic have expanded the company’s ability to offer computerized systems and services to the global gaming industry.

In June 2020, SciPlay completed the acquisition of the privately held mobile and social game company Come2Play, which expanded and diversified the former’s existing portfolio of social games. The company plans to launch an additional casual game in 2022.

In May 2021, Scientific Games completed the acquisition of SportCast, a well-known provider of sports betting, thereby expanding its portfolio.

In July, the company announced its intent to acquire the remaining 19% equity interest in SciPlay that it does not currently own, in an all-stock transaction, following which SciPlay would become a wholly-owned subsidiary of Scientific Games.

Other recent notable acquisitions by Scientific Games include SportCast, a well-known provider of sports betting; Sideplay Entertainment, a leading digital eInstant content studio and Sydney-based slot developer, Lightning Box.

Zacks Rank & Stocks to Consider

Scientific Games currently carries a Zacks Rank #3 (Hold).

Avnet AVT and WESCO International WCC are a couple of better-ranked stocks in the broader technology sector. Both sport Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long term earnings growth rate for Avnet and WESCO currently stands at 25.4% and 10%, respectively.

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Avnet, Inc. (AVT) : Free Stock Analysis Report

Scientific Games Corp (SGMS) : Free Stock Analysis Report

WESCO International, Inc. (WCC) : Free Stock Analysis Report

Endeavor Group Holdings, Inc. (EDR) : Free Stock Analysis Report

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