Scientific Games Corporation, doing business as Light & Wonder, (NASDAQ: SGMS) (“Light & Wonder” or the “Company”) today completed the previously announced sale of its Lottery Business to Brookfield Business Partners L.P. for $5.8 billion in gross cash proceeds and approximately $5.0 billion of net after-tax cash proceeds.1 The sale marks a major milestone in transforming the Company and its balance sheet, delivering on one of the key promises the Company made as part of its strategic review. After another record year this is a significant step forward for the Lottery Business, positioning it to accelerate growth as a stand-alone company with a singular focus on its lottery customers.
With the net proceeds from the sale of the Lottery Business, Light & Wonder is executing a balanced and opportunistic approach to capital allocation, as communicated in its fourth quarter 2021 earnings call, focused on the priorities below:
- Priority #1: Debt reduction to a target net debt leverage ratio(2) range of 2.5x to 3.5x. The Company plans to use the net proceeds from the sale of the Lottery Business to pay down approximately $5.0 billion of its existing debt, by reducing and refinancing its SGI Term Loan B-5 and paying off certain outstanding notes. Taking this pay down into account, the Company’s adjusted net debt reflecting after-tax proceeds(2)(3) at year end 2021 would have been approximately $3.2 billion compared to $8.2 billion reported at year end 2021. Accordingly, the adjusted net debt leverage ratio reflecting after-tax proceeds(2)(3) at year end 2021 would have been 3.9x, compared to 6.2x reported at year end 2021. The Company anticipates that it will achieve a net debt leverage ratio(2) within its target range of 2.5x to 3.5x following the completion of the previously announced sale of its Sports Betting Business, which is expected to occur in the third quarter of 2022.
- Priority #2: Share buy-backs to return substantial capital to shareholders now and in the future. The Company recently announced the authorization of a 3-year, $750 million share repurchase program. Since the announcement the Company has been actively repurchasing shares, reflecting its strengthened balance sheet, the recurring nature of its revenue, strong cash flow generation and the value in its shares.
- Priority #3: Disciplined investment in key growth opportunities. The Company will prioritize using its capital for buy-backs, debt reduction and organic investments unless convinced that M&A activity will deliver greater long-term shareholder value than other uses of the Company’s capital.
“The Lottery Business sale closing is a significant step towards streamlining our portfolio and strengthening our balance sheet as we execute on our strategy to transform our business with a singular focus on building great games and franchises to entertain our players wherever and whenever they want to play. The convergence of land-based and digital continues to gain momentum and we are strongly positioned to be a leader in the industry,” said Light & Wonder Chief Executive Officer Barry Cottle. “With the completion of the Lottery Business sale and the upcoming sale of our Sports Betting Business, we are moving rapidly as we execute on our vision to be a leading cross-platform global game provider and unlock the full potential of Light & Wonder. This also positions the Lottery Business for success as a stand-alone company completely focused on innovating for its global lottery customers.”
“The proceeds from this transaction and our strong cash profile allow us to accelerate progress on our capital allocation strategy,” said Light & Wonder Chief Financial Officer Connie James. “We now have the financial flexibility and balance sheet integrity that, combined with our double-digit growth profile and high mix of digital and recurring revenues, give us a tremendous opportunity to continue to drive shareholder value.”
As previously announced, the Company recently rebranded to Light & Wonder as part of the sale of its Lottery Business. The Lottery Business will maintain the Scientific Games name.
About Light & Wonder
Scientific Games Corporation, doing business as Light & Wonder, is a global leader in cross-platform games and entertainment. The Company brings together over 5,600 employees from six continents to connect content between land-based and digital channels with unmatched technology and distribution. Guided by a culture that values daring teamwork and creativity, the Company builds new worlds of play, developing game experiences loved by players around the globe. Its OpenGaming™ platform powers the largest digital-gaming network in the industry. The Company is committed to the highest standards of integrity, from promoting player responsibility to implementing sustainable practices.
1 The sale of certain international Lottery Business subsidiaries (Scientific Games International GmbH, and its two subsidiaries) (the “Austria Business”) is awaiting regulatory approval in Austria, which is expected to be obtained by the end of the second quarter of 2022, with the transaction to be completed promptly thereafter. The $5.8 billion of gross cash proceeds and $5.0 billion of net after-tax cash proceeds include approximately $104 million that will be paid to the Company only upon completion of the sale of the Austria Business.
2 Represents a non-GAAP financial measure. Additional information on non-GAAP financial measures presented herein is available at the end of this release.
3 The calculations of adjusted net debt reflecting after-tax proceeds and adjusted net debt leverage ratio reflecting after-tax proceeds are included at the end of this release.
