Perelman Ups Stake in Sci Games

Ronald Perelman, the 76-year-old chairman of Scientific Games Corporation, has increased his stake in the company, spending $2.17 million to buy 110,000 shares at $19.73 per share. The following week, the billionaire chairman of the supplier spent more than $1.5 million on 75,000 SG shares at $20.21 per share. Perelman now controls 36.4 million shares of SGMS through his New York-based investment arm McAndrews & Forbes, constituting nearly 40 percent of the company.

Wall Street acted favorably to the news, with SGMS shares rising 5.16 percent to close at $20.78. This reversed a 4.45 percent dip following news the company is suing its third-largest shareholder, which may result in a forced redemption of 8.6 million shares owned by Hong Kong-based Sylebra.

In that case, Scientific Games has filed suit in Las Vegas to force disclosure of information from Sylebra Holdings.

The suit comes after repeated requests for information and disclosure documents from Sylebra, which owns a 9.34 percent stake in the supplier, to confirm the Hong Kong company’s suitability for licensing in the U.S.

The lawsuit claims Sylebra owns a large stake in a Russian company with alleged ties to illegal gambling, money laundering and support for terrorist organizations. The company says it has repeatedly asked the company for information “consistent with its ongoing obligation to inform regulators about matters relevant to suitability.”

Under Scientific Games’ corporate bylaws, the failure of Sylebra to comply with these requests could lead the company to declare it a “disqualified holder,” forcing redemption or sale of Sylebra’s 8.6 million shares in the company.

“Sylebra has manipulated the regulatory system by strategically timing the disclosure of information that it is willing to part with while utilizing procedural mechanisms to prevent any order requiring it to turn over the information that actually matters,” Scientific Games wrote in the lawsuit.

“This sustained pattern of obfuscation, procedural maneuvering and outright stonewalling—both in response to requests and the reasonable requests of governing regulators—raises serious questions about just what Sylebra might be trying to hide. These concerns have only increased given recent changes in ownership and management with respect to Sylebra.”

SunTrust Bank gaming analyst Barry Jonas tied the purchase to the Sylebra case.

“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.”