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Caledonia investment a “vote of confidence” in Scientific Games: Union Gaming

The US$1 billion investment in Scientific Games from a consortium led by Australia’s Caledonia (Private) Investments is a “vote of confidence” in the global gaming giant as it looks to emerge from the devastation of the COVID-19 pandemic.

The assessment was offered by boutique brokerage Union Gaming following confirmation this week that Scientific Games Chairman and largest shareholder Ronald Perelman had reached an agreement to sell the 34.9% stake held by his wholly-owned investment vehicle MacAndrews & Forbes Holdings Ltd.

In a Tuesday note, Union Gaming’s John DeCree said Caledonia’s investment was confirmation that Scientific Games is well-placed in the long-term in both the land-based as well as the digital and social spaces.

“While our confidence in the company’s long-term value and cash generating capabilities never wavered, this full refresh renews our confidence in the story and the company’s execution capabilities,” DeCree said.

“Caledonia has a strong track record in the industry. We have long been a supporter and believer in the Scientific Games portfolio of assets and the big swing by Caledonia is another vote of confidence in the company and affirmation of our long-term investment case.”

Increasing Union Gaming’s price target for Scientific Games shares, which grew 40% on Monday, from a target of US$27 to US$38, DeCree added, “While a 40% single-day run might seem like a good time to take some chips off the table, digital gaming in the US is red hot and we suspect Caledonia and its co-investors are playing for much more.

“We continue to believe there is significant underappreciated value and opportunity in the social gaming and digital business as well as an impending recovery in the gaming business with the original Aristocrat brain trust now fully aligned from the board to management.”

Caledonia’s acquisition will see Perelman and two other MacAndrews & Forbes Holdings Ltd representatives step down from the Scientific Games board, with former Aristocrat CEO Jamie Odell and CFO Toni Korsanos taking over as Executive Chairman and Executive Vice Chairman respectively.

The Sydney-based fund manager – whose current gaming interests include a US$2.5 billion position in UK online gaming firm Flutter Entertainment and US$200 million in fantasy sports leader DraftKings – was a major shareholder in Aristocrat during Odell’s tenure.

“This creates a unique alignment (at Scientific Games) where shareholders, board members, and executive management all have experience together,” DeCree said.

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