Perelman ups ownership in Scientific Games, spends $2.17M on 110,000 shares

Howard Stutz has over 30 years of experience reporting on the gaming industry.

Scientific Games Chairman Ronald Perelman has added to his majority stake in the Las Vegas-based gaming equipment provider.

The 76-year-old billionaire – currently No. 49 on the Forbes 400 with a net worth of $9.2 billion – spent $2.17 million Monday to acquire 110,000 shares of Scientific Games at $19.73, according to a filing with the Securities and Exchange Commission.

The market acted favorably to the news, with the company’s stock price closing at $20.78 on the Nasdaq, up $1.02 or 5.15 percent.

The stock acquisition was not as dramatic as Perelman’s shopping spree in December, when he spent $27 million to acquire 1.5 million shares. Through his New York-based MacAndrews & Forbes investment arm, Perelman now controls more than 39 percent of the company, which provides gaming equipment to both the casino industry and lotteries worldwide.

SunTrust Bank gaming analyst Barry Jonas suggested that suitability concerns over Sylebra Holdings, the company’s third-largest shareholder, may have spurred the stock purchase. Scientific Games sued the Hong Kong-based company on Friday to force compliance with requests for information and disclosure submissions for suitability from more than two dozen gaming regulatory bodies both in the U.S. and internationally.

“Mr. Perelman has consistently added to his Scientific Games equity position when there’s been some sort of dislocation in the stock price – including (the) recent noise around Sylebra,” Jonas said. “We think this points to Mr. Perelman’s current view on valuation and his longer-term conviction in the business.”

Perelman has grown Scientific Games through two major acquisitions: in 2013 the then lottery-centric company acquired slot machine developer WMS Industries for $1.3 billion. Two years later, Scientific Games bought Bally Technologies for $5.1 billion.

Since that time, Perelman has installed four different CEOs. Last month, he named former Aristocrat Leisure CEO Jamie Odell as a special advisor, saying in a statement that his one-time gaming equipment rival would offer support to the company’s current growth strategies.

Scientific Games’ stock price is roughly 65 percent below its 52-week high.

The company, along with other gaming equipment providers, is expected to benefit from Illinois’ planned gaming expansion, which could add up to 35,000 slot machines to the market.

Analysts said Scientific Games has lost market share on the slot machine side to a larger rival – Aristocrat – and smaller competitors, such as AGS and Everi Holdings.

Meanwhile, the company has had tremendous success in providing sports wagering technology and management systems since the May 2018 Supreme Court ruling opened up the legal sports betting market throughout the U.S.

The company has reached deals with Caesars Entertainment, Wynn Resorts, and New York’s Oneida Indian tribe for both its Open Bet platform and for the company’s Don Best Group division, acquired last October, to manage pricing and other sports wagering efforts.

In May, the company spun off its social gaming arm into a separate public company, SciPlay Corp., and raised more than $400 million through its initial public offering. Scientific Games said the proceeds from the IPO would be used to pay down its debt, which stood at $8.9 billion as of March 31.

SciPlay shares closed Wednesday at $14.02 on the Nasdaq, up 42 cents, or 3.09 percent.

“We also see Scientific Games’ free cash flow inflecting this year to help drive management’s goal of one turn of deleverage in 2019, which we believe would be a positive for the stock,” Jonas said.