British gambling company Sportech has entered into an agreement to purchase U.S. racing and venue management business Scientific Games Racing (SGR) from Scientific Games Corp. for as much as $83 million in cash and shares, the companies announced on January 27.

If approved by shareholders, Sportech would gain control of SGR, which processes pari-mutuel wagers for a variety of racing companies in North America, including all of the racetracks and betting sites in California. SGR (formerly Autotote) is one of three major bet-processing companies in the U.S., along with United Tote and AmTote.

In the deal, Sportech will pay Scientific Games $33 million in cash when the transaction closes, and Scientific Games will receive $32 million in stock in Sportech, or approximately 20 percent of the shares outstanding in the company.

The agreement states that Scientific Games will also receive $10 million in “deferred cash consideration” in 2013 and will be eligible to receive $8 million in additional compensation that year if the bet-processing company hits “certain performance targets.”

To reflect the loss of Scientific Games Racing on its balance sheet and fees associated with the transaction, Scientific Games will take a $55 to $65 million non-cash charge in the fourth quarter.

Piers Pottinger, chairman of Sportech, says: “This is a transformational transaction for Sportech. It catapults the business onto the international stage.”

Internet gaming software company Playtech intends to buy a 9.99 percent stake in the enlarged group, and has already signed a letter of intent to provide gaming products and services to the SGR business.

Return