Scientific Games Buys Sideplay Entertainment, Bolstering iLottery Offerings

Scientific Games (NASDAQ:SGMS) is acquiring Sideplay Entertainment in an effort to add to its roster of internet lottery offerings.

Scientific Games
Scientific Games
Instant win games made by Sideplay Entertainment. Scientific Games is acquiring the company. (Image: PR Newswire)

Financial terms of the deal for closely held Sideplay weren’t disclosed nor did a statement issued by the companies include a date when the transaction will close. Sideplay brings a contract as the primary supplier of eInstant games with the UK National Lottery, one of the biggest lottery groups in the world, to the table.

Through this acquisition, Scientific Games Lottery Group expects to expand its share in digital lottery markets,” according to a statement. “The addition of digital game server content distribution technology to Scientific Games’ existing digital tech stack will also allow for increased speed-to-market.”

Las Vegas-based Scientific Games and Sideplay have a previously existing relationship under which the buyer distributes the target’s content for North American iLottery programs, including the Pennsylvania Lottery and Loto-Québec.

Scientific Games Tapping into iLottery Growth

Gaming technology provider Scientific Games was an early mover in the online lottery business, having rolled out the first digital instant game in the U.S. in 2014. The company also offers lottery interactive games, mobile apps, player loyalty programs and other interactive products and services in the US.

While iLottery isn’t yet generating fervor on par with internet casinos or online sports betting, it’s a growth segment in its own right. Some analysts see massive opportunity with internet lotteries, noting that market could eventually rival that of online sports betting.

Like iGaming and sports wagering, internet lottery is a play on broadening legalization of its underlying business model — something that’s taking place today. States including Michigan, New Hampshire, North Carolina and Virginia, among others, currently permit online lottery games. Scientific Games has 20 iLottery customers around the world.

“Since 2003, the Sideplay team has launched more than 270 instant win games for leading lottery and gambling operators around the world. Those games have been played over 100 million times, producing meaningful revenue for Sideplay’s customers,” according to the statement.

Scientific Games Shedding Old School Lottery Business

In addition to manufacturing slot machines, Scientific Games also provides lottery services to states and wagering platforms to sportsbooks, but in June the company said it’s divesting the latter two businesses in an effort to trim debt and focus on digital gaming.

Analyst believe Scientific Games’ traditional lottery business, which includes development of instant games, can command a higher multiple as a standalone entity. The unit generated $430 million in earnings before interest, taxes, depreciation and amortization (EBITDA) over the past 12 months. Analysts estimate it could fetch more than 10 times that as an IPO valuation.

A rumor surfaced last month that Scientific Games could list the lottery business in Sydney, but there’s been no public chatter to that effect in six weeks.

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