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Scientific Games replaces CEO after completing $1.5 billion WMS purchase


Less than a month after buying the gaming industry’s third-largest slot machine manufacturer, lottery provider Scientific Games Corp. replaced its chief executive and named its largest shareholder as chairman.

The moves Tuesday surprised some on Wall Street.

Several analysts said A. Lorne Weil had planned to leave the New York-based company. The timing was unexpected, coming just a few weeks after Scientific Games completed the $1.5 billion buyout of WMS Industries.

“We would have expected Lorne to depart after a couple of quarters under the belt,” Eilers Research principal Todd Eilers told investors. “Regardless, we wouldn’t read too much into the transition as our channel checks and survey data indicate WMS continues to perform very well.”

Scientific Games named board member David Kennedy as chief executive officer. Board member and investor Ronald Perelman was appointed chairman.

Weil had been the company’s chairman since 1991 and was CEO from 1992 to 2008. He returned to the CEO position in November 2010. Scientific Games did not give a reason for Weil’s departure.

In a statement, Scientific Games said the company decided to separate the roles of chairman and CEO.

Wells Fargo gaming analyst Barry Jonas said Weil’s “rash departure” probably means the Scientific Games was seeking a new direction because of the WMS purchase.

Kennedy, 66, has been a member of the Scientific Games board for four years. He also spent two years as Scientific Games’ chief administrative officer.

Kennedy was CEO of cosmetics giant Revlon between 2006 and 2009 and held senior management positions with The Coca-Cola Company.

“David understands the business extremely well and is ideally qualified to work with the management team to further improve results, oversee the integration of WMS Industries, and work with the board to facilitate an ongoing succession process,” Perelman said in a statement.

The 70-year-old Perelman, who owns 38 percent of Scientific Games, is ranked 27th on the Forbes 400 List of American billionaires with a net worth of $14 billion.

Perelman also owns a large stake in Revlon.

Deutsche Bank gaming analyst Kelly Knybel told investors the change in CEOs should be viewed “with some level of caution” because Kennedy has a “relatively short” gaming background.

Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said “rumblings” of a management change had surfaced recently.

“Based on our conversations with the company, we do not sense the decision was driven in any way by improprieties or concerns over the integration of the WMS business, rather it was purely a board-driven decision designed to unlock incremental equity value in the Scientific Games/WMS platform,” Wieczynski said.

The merger, in which the smaller lottery company acquired the casino industry’s third-largest manufacturer, was completed Oct. 18.

Scientific Games, which was licensed in Nevada in September, thinks the combined company could result in pretax earnings of as much as $600 million this year.

WMS has a 145-person sales and service headquarters in Las Vegas.

Scientific Games officials have said they would like to increase the company’s presence in Las Vegas. The company will separately operate two divisions: gaming and lottery.

Shares of Scientific Games fell 77 cents, or 4.22 percent, on the Nasdaq Global Select to close at $17.47.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.

 

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