Shares in Light & Wonder subsidiary SciPlay traded 5.9% higher in after hours trading after an activist investor urged L&W to purchase the remaining 19% of SciPlay it does not already own.
Engine Capital is an activist investor and one of the largest shareholders of SciPlay, with a 7.4% ownership position in the business.
Engine sent letters to the boards of L&W and SciPlay, urging the supplier formerly known as Scientific Games to repurchase the remaining shares in the mobile-focused subsidiary, which were originally offered on the public market in an IPO in May 2019.At that time, L&W sold 22 million shares in the business at a price of $16 per share, while retaining all of the firm’s Class B stock and 81% of its Class A stock.
Now, Engine Capital has urged the supplier to reconsider and contemplate buying back the remaining shares in the business for a price between $15 and $16 per share.
Engine said that the current structure of SciPlay is “inefficient and creates an overhang” on the valuation of both companies, while it believes L&W also trades at a significant discount to its intrinsic value, partly due to the undervaluation of SciPlay.
Engine Capital’s Arnaud Ajdler and Brad Favreau: “If a deal can’t be reached between both companies … we would then encourage SciPlay to start a review of its strategic alternatives and look for a buyer with the blessing of Light & Wonder.”
It added that its recommended purchase of SciPlay shares would be immediately accretive to L&W.
This isn’t the first time L&W has considered buying back its IPO’d stake in SciPlay. In July 2021 the business – still known as Scientific Games at the time – put forward a proposal to acquire the remaining 19% equity interest in the firm in an all-stock transaction, with shareholders set to receive 0.25 SGMS shares for every SciPlay share held.
At the time, the SGMS board said: “We believe a merger of SGMS and SciPlay will deliver significant operational, strategic and financial benefits and drive shareholder value in excess of what each company could generate on a standalone basis.”
In January this year, however, the business withdrew the proposition, as former president and CEO Barry Cottle said the buyout “would not be prudent for our shareholders at this time.”