Scientific Games Sports Betting Unit Draws Interest from Former F1 Manager Jordan

Posted on: July 17, 2021, 03:31h. 

Last updated on: July 17, 2021, 04:38h.

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

Irish businessman Eddie Jordan, formerly the owner of a Formula One (F1) team bearing his surname, is rumored to be readying a bid for the OpenBet sports betting unit. That division was recently put on the sale block by Scientific Games (NASDAQ:SGMS).

Scientific Games
Former Formula One owner Eddie Jordan (left), seen here with driver Sebastian Vettel. Jordan is rumored to be interested in Scientific Games’ sports betting unit. (Image: Getty Images)

Speculation to that effect was recently stirred by former Australian F1 driver Mark Webber, who’s a close friend of Jordan. In a recent Instagram post, Webber noted his friend could be on the cusp of a “mega acquisition in gaming.”

The Currency, a European publication, originally reported the story, noting that a former Irish executive from the Las Vegas-based gaming technology company supports Jordan’s bid to acquire the sports betting arm. Scientific Games’ sports wagering unit carries an estimated valuation of at least $1 billion.

In late June, the company revealed plans to divest its lottery and sports betting businesses as part of an ongoing effort to reduce its debt burden, which currently stands at about $9.5 billion.

Scientific Games Has Plenty of Options

Upon divulging plans to part with the lottery and OpenBet units, Scientific Games said the transactions could come in one of three ways. This includes an initial public offering (IPO), a merger with a special purpose acquisition company (SPAC), or a traditional sale or a merger with another firm.

The picture is, however, changing. For example, rumors surfaced last week that the company could consider an Australian IPO for the lottery business. Some experts believe that could be a shrewd move for Scientific Games, because the lottery arm could fetch a higher multiple in the Land Down Under.

It’s estimated that business could garner a valuation of 10 times trailing 12-month earnings before interest, taxes, depreciation and amortization (EBITDA) of $430 million. One investment bank says an Aussie IPO of the lottery arm could be valued at $3.44 billion to $5.16 billion.

As for the OpenBet business, it’s expected to be alluring for suitors in its own right, as it provides back-end services and technology for some of the largest sportsbook operators in the world. It annually processes billions of dollars of wagers.

Investors not yet Impressed

Shares of Scientific Games are higher by nearly 47 percent year-to-date, good for one of the better performances in gaming industry. However, while analysts are mostly enthusiastic about the company’s plan to reduce debt by parting with the lottery and OpenBet units, the stock has yet to be rewardedfor those plans.

In fact, the shares slumped 14.42 percent this week. Some of that decline is attributable to Scientific Games announcing an offer to buyout the 19 percent of social casino developer SciPlay Corp. (NASDAQ:SCPL) it doesn’t currently own.

For Scientific Games, regaining momentum is straight-forward. If the company commands higher than expected prices for the lottery and sports betting businesses, that could assuage investors’ concerns about the debt load and potentially lead to a renewed rally for the stock.