What happened
Shares of Scientific Games (SGMS +7.30%) were jumping 9.2% higher in morning trading Thursday after the global gaming company withdrew its offer to buy the remaining 19% interest in SciPlay (SCPL +0.00%) that it doesn't already own.
SciPlay stock plunged 18% on the announcement. The deal had been announced in July as an all-stock offer at a price of 0.250 shares of Scientific Games for each share of SciPlay owned. Scientific Games will retain its 81% equity interest in SciPlay.
Image source: Getty Images.
So what
The acquisition attempt was part of Scientific Games' effort to increase its focus on digital gaming markets. It recently announced it intended to divest its lottery and sports-betting businesses for approximately $7 billion, and those deals are still on track to close in the second quarter of 2022.
SciPlay develops and publishes digital games for mobile and web platforms, offering casino games like Jackpot Party Casino and Quick Hit Slots and casual internet games such as Monopoly Slots and Bingo Showdown. It will continue to have access to Scientific Games' library of more than 1,500 real-world slot and table games.
Now what
The two sides were unable to come to terms after a special committee of SciPlay's independent board members rejected Scientific Games' initial stock-swap offer.
Scientific Games had made clear in its original offer it wasn't interested in negotiating the terms of the deal and wouldn't consider other offers. "We are interested only in the Transaction specified above with respect to the publicly traded shares of SciPlay," the offer letter stated, and it didn't want to hear about any other potential sales of the company to third parties.
While a pairing of the two makes sense, the rigidity to which Scientific Games held to the original offer confirms management's discipline and suggests the gaming company believes its stock is undervalued.
