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SciGames Buys DEQ, Spins Off Interactive

SciGames Buys DEQ, Spins Off Interactive

Slots, systems and lottery giant Scientific Games made two moves in September that demonstrate the new direction it will take under recently appointed President and CEO Kevin Sheehan.

The company announced that it has designated its wholly owned interactive social gaming subsidiaries, including Dragonplay Ltd. and Phantom EFX, as unrestricted subsidiaries under its debt agreements, with the goal of maximizing growth for the company. The company indicated it will consider a range of options to solidify its leadership in this fast-growing segment, including potential new joint ventures, acquisitions, IPO and other growth options.

“Our industry-leading investment in innovation is paying off,” said Sheehan. “Following our company’s third consecutive quarter of revenue growth, we see this as a perfect time to accelerate momentum and explore additional opportunities to deliver greater value from this strong and rapidly growing segment of our business.”

The company’s social gaming business has generated sequential double-digit growth in each of the most recent three quarters and a 68 percent increase in revenue year-over-year for the most recent quarter (second quarter ended June 30).

Following the unrestricted designation, the social gaming entities will remain wholly owned by Scientific Games and continue under the leadership of Barry Cottle, chief executive, interactive and Jordan Levin, president, interactive.

Meanwhile, Scientific Games is expanding its reach into table game technologies with a deal to buy DEQ Systems.

The all-cash transaction totals C$21 million, or C$0.38 per share of Quebec-based DEQ.

DEQ generated C$9.5 million in the financial year ended May 31, principally on an innovative progressive game platform called EZ Baccarat. The company has around 800 of the games placed in 150 casinos worldwide.

Scientific Games sees the acquisition as enhancing its positioning as a one-stop shop for casino operators, adding more proprietary table games and table progressive systems to the Shuffle Master brand along with a high-margin base of recurring revenue via the licensing of DEQ’s intellectual property.

“The DEQ team has grown a fantastic business focused on providing revenue-generating and entertaining solutions for casino operators around the world,” said Roger Snow, Sci Games’ senior vice president, table and utility products.

DEQ Systems President and CEO Joseph Bertolone said, “We look forward to working closely with the Scientific Games team to ensure a smooth transition and continued innovation for gaming operators and their players around the world.”

The deal is expected to close in the fourth quarter, pending the assent of DEQ’s shareholders and regulatory approvals, and be accretive to earnings and operating cash flow for Scientific Games in 2017.

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