Australian lottery unit IPO cut by 40 percent to $3 B

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Australian lottery unit IPO cut by 40 percent to $3 B

IPO reduced by about 40% to about $3 billion - sources.

SYDNEY, Oct 21 Reuters - A potential Australian IPO for the lotteries unit of Scientific Games Corp has been cut by two fifths to about $3 billion, according to a document and two people familiar with the matter.

The Las Vegas-based slot machine maker had earlier sought to raise up to $5 billion for the predominantly North American and European unit, Reuters reported last month https: www.reuters.com. However, given that it would be such a big offering - Australia's largest in seven years - a discount was justified, said one of the people. The fiscal 2022 price on offer represents a multiple of about 15 times its current earnings, the two sources said. That compares with the valuation proposed previously of up to 22 times.

Scientific Games declined to comment and the sources asked not to be identified because the details were private.

The company is also exploring a strategic sale of the unit in addition to sounding out the market about an IPO.

Fund managers have now been told Scientific Games is looking to sell 51% of the company for A $3.8 billion $2.9 billion or A $2.75 a piece, according to a message from the managers seen by Reuters.

Additional shares could be sold under a so-called green shoe option that would take the total size of the deal to A $4.2 billion or 56% of the company, the document shows.

The IPO, which seeks to take advantage of Australian investors familiarity with the lotteries sector, is set to become the country's largest share offer since the privatisation of health insurer Medibank Private Ltd via a $4.9 billion IPO https: www.reuters.com.au. com article australia-medibank - idUKL 3 N 0 TD 02 B 20141123 in 2014, according to Refinitiv data.

The company said in June it would seek to divest its lottery and other non-core sports betting businesses to pay down part of its $8.2 billion net debt.

It has hired five investment banks, including Macquarie Group, to explore an Australian listing, the people said.

Macquarie, which is also handling the potential sale of the unit, did not return a request for comment.

Bids for the sale are expected in the coming days and will help management decide on the weekend whether to go ahead with the IPO, one of the sources said. If they choose to proceed with an IPO, a prospectus will be added shortly, the person added.

The Scientific Games' Lotteries Unit, which sells wholesale lottery system services to clients in over 50 countries, is expected to see a 14% increase in adjusted earnings before interest tax depreciation and amortisation to $498 million in fiscal 2022.