Scientific Games to Sell OpenBet to Endeavor Group for $1.2B

Gambling products and services provider Scientific Games Corporation (SGMS) has inked a cash and stock deal valuing $1.2 billion to sell its sports betting business OpenBet to Endeavor Group Holdings, Inc. (EDR), a global sports and entertainment company. Following the news, shares of SGMS jumped 6.7%, while EDR jumped 10.1% in extended trade on Monday.

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Scientific Games offers dynamic games, systems and services for casinos, lottery, online gaming and sports betting. SGMS aims to become a leading cross-platform global game company, and the sale of OpenBet is a step towards de-leveraging its balance sheet and unlocking maximum value for its shareholders. SGMS plans to invest the proceeds from the deal in key growth areas, especially content and digital markets. (See Scientific Games stock charts on TipRanks)

OpenBet is a global online sports betting technology company with 75 global customers, including 24 sports books across 12 states. OpenBet offers sports content, technology and services to the largest sports operators in the U.S., Australia, the U.K. and Canada, and has a leading position in Europe and APAC. Additionally, OpenBet is known to have a 100% uptime record across major sporting events.

As per the terms of the deal, the purchase consideration will be funded by $1 billion in cash and $200 million worth of EDR’s Class A common stock. The deal is expected to close in the second quarter of 2022, subject to certain regulatory and closing conditions.

Commenting on the deal, the Chief Executive of Scientific Games’ Digital Business, Jordan Levin, said, “We believe Endeavor will enable us to build on our exceptional track record of innovation and reliability and unlock even greater value for our customers and employees. Endeavor’s deep industry relationships and global reach make them the ideal partner. Together, these companies will be well-positioned to capitalize on emerging trends to deliver even more innovative and tailored solutions to customers as we define the future of sports betting entertainment.”

Recently, Craig-Hallum analyst Ryan Sigdahl maintained a Buy rating on the stock and lifted the price target to $105 from $100 (26.6% upside potential).

Stating that SGMS’ transformational plans and upside potential remain underappreciated, Sigdahl believes that the company is poised for further upside growth potential with improving fundamentals and expected proceeds from the planned divestiture of its sports betting technologies and lottery businesses.

Overall, the stock has a Moderate Buy consensus rating based on 4 Buys, 3 Holds and 1 Sell. The average Scientific Games price target of $76.38 implies 7.9% downside potential to current levels. Shares have gained 126.1% over the past year.