Online casino supplier Light & Wonder (LNW) has announced a formal offer to take social casino developer SciPlay back in-house. SciPlay started as a social gaming division of LNW, but the latter spun it off as an independent company in 2019. Even so, LNW still owns 83% of SciPlay and would like to acquire the remaining 17% for $422 million.
This is the second time LNW is attempting to reverse the decision to spin off SciPlay. In 2021, LNW (still known as Scientific Games at the time) owned 81% of SciPlay and tried to purchase the remaining 19%. It subsequently withdrew the offer, citing it would not be prudent for its shareholders, though it did go on to increase its stake in the spin-off by 2%.
The company’s rebranding from Scientific Games to Light & Wonder accompanied a narrowing of its strategic focus. The decision to sell off its sports betting and lottery divisions to concentrate on casino products may be related to its desire to retake full ownership of its former social gaming division.
SciPlay is products mobile-only, free-to-play casino products without cash prizes. A key point of differentiation for its products is that because of its origins as part of LNW, it can offer play money adaptations of popular real-money slots from its former (and possibly future) parent. This valuable intellectual property includes the likes of:
- 88 Fortunes
- Monopoly-branded slots
- Coin Combo series
The games are available through Facebook, making registration easy for those with accounts on the social media site.
LNW Says It’s Offering A Premium Price
In addition to 83% of the economic interest, LNW controls 98% of voting shares at SciPlay. That has several implications, including that no other company could acquire SciPlay without LNW’s consent. It also means that if the board of directors chooses to accept LNW’s offer, there’s no need for a shareholder vote.
The all-cash $422 million offer equates to about $20 per share, which implies a value of $2.1 billion for SciPlay. That’s 28.5% higher than what the company was trading for on May 17, 2023, the day before the offer. The $20 per share is also higher than the $15 to $16 value estimated last year by Engine Capital when calling for a merger with SciPlay. Engine is a significant minority owner of SciPlay with about 5% of the company’s shares.
Light & Wonder said it would not need to conduct due diligence because of its intimate familiarity with SciPlay. Additionally, LNW said it would not require outside financing. All of these factors mean the deal could close very quickly, pending board approval.
The Deal Is Part Of Light & Wonder’s Plan For iGaming Expansion
Purchasing SciPlay solidifies LNW’s plan for growing its iGaming business. Before 2021, the company was involved in many sectors but decided to focus on casino products and especially online gaming. As part of that plan, it sold its lottery division, SG Lottery, for $5.8 billion in 2022. It used the proceeds to reduce its debt load, which had been dragging on its financials. Later the same year, it offloaded its OpenBet sportsbook for $800 million.
Having pared away the other verticals, it then began a string of acquisitions in the casino space.
- Aug 2021: Online game developer Lightning Box.
- Nov 2021: Authentic Gaming, a live dealer developer. Authentic is a leader in providing live dealer games in Europe and expects to come to the US with a Michigan launch this year.
- May 2022: Game supplier Playzido, whose Remote Gaming Server platform is among the industry’s best in game development
- Oct 2022: Loyalty solutions provider House Advantage and its HALO platform
Re-acquiring SciPlay is consistent with that pattern. Light & Wonder says it will add momentum to its cross-platform strategy. It will also combine the companies’ balance sheets, allowing LNW to invest cash where it would benefit investors the most.
Q1 2023 results show that both companies are performing well. SciPlay generated $186 million in revenue, up 18% year-over-year. LNW’s gaming revenue was $419 million, also up 18%. Meanwhile, LNW’s iGaming revenue was $65 million, up 10%. The company said the increase in iGaming was primarily due to US expansion. LNW also returned $437 million of capital to its shareholders.
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