Scientific Games Corporation has submitted a proposal to acquire the outstanding shares of its social gaming division SciPlay Corporation in a deal with an implied enterprise value of $1.9bn.
The proposal would see Scientific Games (SGMS) acquire the remaining 19% equity interest in the games developer that it does not currently own in an all-stock transaction, following which SciPlay would become a wholly-owned subsidiary.
SciPlay was previously the social division within SGMS until becoming an independent business, trading on the Nasdaq Stock Exchange, in 2019.
Under the terms proposed by SGMS’s board in a letter addressed to SciPlay’s board, SciPlay shareholders, other than itself and its subsidiaries, would receive 0.250 shares of SGMS common stock for each share of SciPlay Class A common stock they own, which would imply an enterprise value of $1.9bn and purchase multiple of 2021E consensus EBITDA of 10.1x and 2022E consensus EBITDA of 9.4x.
Commenting on what is currently an expression of interest only, SGMS said: “This proposed transaction is another important step forward on the strategy Scientific Games recently announced to become a content-led growth company with a particular focus on digital markets and unlock the value of the company’s products and technologies.
“SciPlay fits perfectly into Scientific Games’ focus on building engaging content and launching great games more fully cross-platform.”
SGMS owns approximately 81% of the economic interest and 98% of the voting interest in SciPlay, and added that it would not back any rival bids.
It added that the transaction implies a premium of 11% based on the SGMS and SciPlay respective closing stock prices as of the close of business on 14 July 2021, the last trading day prior to the proposal, and a premium of 10% based on the thirty-day volume weighted average price for SciPlay Class A common stock.
Key benefits would include acceleration of SGMS’s vision of becoming a leading cross-platform global game company through the integration of SciPlay by leveraging content, game mechanics and its new game development roadmap to create an enhanced player experience across land-based and digital platforms as we see increasing convergence.
The deal would also position SciPlay to accelerate its strategy and expand in the high growth casual gaming market as part of a combined company with a strengthened balance sheet, substantial cash flows and enhanced financial flexibility.
The SGMS board added: “We believe a merger of SGMS and SciPlay will deliver significant operational, strategic and financial benefits and drive shareholder value in excess of what each company could generate on a standalone basis.
“Further, we believe SciPlay public shareholders will benefit from increased trading liquidity as a result of being part of a pro forma entity with a market capitalization of $7.0bn (based on the closing share prices of SGMS and SciPlay on July 14, 2021) and a public float that would be approximately 18x larger than SciPlay today.”