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Scientific Games reportedly considering Australian IPO to reduce debt

Published: May 5, 2021, 08: 44 hrs.

Last updated: 5 May, 2021, 08: 44 h.

Todd Shriber

Gaming equipment maker Scientific Games (NASDAQ: SGMS) may be considering an initial public offering (IPO) on the Australian Securities Exchange ( ASX) as a way to reduce its massive debt.

Scientific Games
Scientific Games slot machine player. The company is considering going public in Australia to raise cash. (Photo: Las Vegas Review-Journal )

The Las Vegas-based company has reportedly engaged Australian investment bank Jarden Australia to gather data on Sydney stock market listings, looking for ways to reduce its substantial liabilities.

It is believed that putting the ASX is just one option on the table, but sources say it was a serious consideration ", reports The Australian Financial Review .

In addition to manufacturing slot machines, Scientific Games also provides lottery services to states and a betting platform. Despite a series of cost-cutting measures at the height of the coronavirus pandemic, the company still costs $9. 43 billion in debt - more than $4 billion more than $5. 40 billion market capitalization. The enterprise value, which is the combination of debt, market value and cash on the balance sheet, is nearly $20 billion.

Deep ties below

Scientific Games has ties to Australia, making Sydney a practical offering.

Board member Jamie Odell, for example, is a respected Australian gaming executive and previously headed Aristocrat - the world's largest slot machine maker - for 10 years. He is also part of Caledonia Investments, which bought a $1 billion stake in Scientific Games from financier Ron Perelman last year.

"Also involved with Scientific Games is Toni Korsanos, another former executive of Aristocrat Leisure her profession on the boards of Crown Resorts and Treasury Wine Estates. Korsanos is executive vice chairman of Scientific Games. Jarden advised Odell and Korsanos when they bought last year ", according to Australian Financial Review .

Sydney IPO makes sense

Scientific gaming selling shares on the ASX is practical on other levels. Firstly, Australia is home to one of the largest and most mature gaming markets in the world, indicating that the listing is likely to find favour with professional and retail investors who are familiar with the brand.

Second, Australian gambling stocks , like their US counterparts, are soaring, thanks in part to a dedicated population of sports bettors - something that scientific gaming offers leverage for. Reflecting this enthusiasm, the stock is up nearly 368 percent over the past year, benefiting from one of the best performances of any gaming stock traded domestically.

If the Las Vegas-based company decides to IPO in Sydney, it has other options for debt reduction. It still owns a huge percentage of online and social casino developer SciPlay (NASDAQ: SCPL).

When Caledonia bought Scientific Games shares last year, analysts speculated that the investment firm might push to reduce SciPlay's stake - then 83 percent - to raise capital and pay down liabilities. As the mobile game maker's shares rise 26. 50 Since the beginning of the year, Scientific Games may strike while the iron is hot to further monetize its position in SciPlay.

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