The ink was hardly dry on lottery giant Scientific Games Corp.’s $1.5 billion buyout of slot machine manufacturer WMS Industries when the corporate management team was shaken up with a new CEO and chairman in November.
Earlier this month, Scientific Games moved WMS’ longtime chief financial officer into the same role with the parent company.
An even larger transition could come later this year.
The bottom line: All this is good news for WMS, considered the casino industry’s third-largest slot machine producer behind International Game Technology and Bally Technologies.
Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said recently he was “more upbeat on the Scientific Games investment case, a feeling we expect to be shared by the investment community in the weeks and months ahead.”
Scientific Games, which provides technology and slot machinelike video lottery terminals used for the operation and management of government-run lotteries, bought WMS as a way to break into the slot machine side of the gaming business.
The deal, which closed in October, was expected to yield $600 million in pretax earnings this year.
One of the ideas was to blend WMS’ slot machine titles into Scientific Games lottery products.
A month after the deal closed, Scientific Games replaced Chairman and CEO Lorne Weil with two people. Board member David Kennedy was named CEO; Ronald Perelman, the company’s largest shareholder, was named chairman.
Earlier this month, Scott Schweinfurth, who spent 13 years as WMS’ chief financial officer, was bumped up to chief financial officer of Scientific Games.
But the more interesting pairing is the confirmation that former SHFL Entertainment CEO Gavin Isaacs is working as a consultant for Perelman, 71, a leveraged-buyout investor who owns 38 percent of WMS.
Perelman, who is ranked 73rd on the Forbes List of the World’s Billionaires — 32nd in the U.S. with a net worth of $14 billion — also owns a large stake in cosmetic giant Revlon, production house Deluxe Entertainment and Humvee maker AM General.
Isaacs, who engineered SHFL’s $1.3 billion acquisition by Bally last year, has a one-year noncompete clause that expires in November. The clause keeps him sidelined from direct employment with a gaming company.
Before joining SHFL, Isaacs was chief operating officer at Bally and president of Sydney, Australia-based Aristocrat Technologies’ American operations, which are in Las Vegas.
Isaacs has a long history in the slot machine and gaming equipment business.
Isaacs’ relationship with Perelman — which he confirmed by direct message on Twitter — has fueled speculation that Kennedy, who was a Scientific Games board member for four years and spent two years as the company’s chief administrative officer, is keeping the seat warm for Isaacs.
Kennedy was Revlon’s CEO for three years and held senior management positions with Coca-Cola Co. He is considered close to Perelman.
Wieczynski said the recent changes in Scientific Games management, including the addition of WMS corporate employees, might soothe investors, who had “oftentimes strained relations” with the lottery company’s management team.
He added that Scientific Games suffered from the “ineffectiveness in clearly articulating expectations to the Street and then operating the business against those expectations.” Much of the investment community, he said, “remained skeptical of the legacy team’s ability to achieve its $100 million deal-related cost-savings target and successfully integrate the two businesses.”
All that has changed.
In an interview published this month in gaming industry trade publication Global Gaming Business, Bill Huntley, the chief executive of gaming for Scientific Games, the division overseeing WMS, said the company plans to expand WMS’ best content across the United States and internationally.
Scientific Games is headquartered in New York City, but much of its main operations are in suburban Atlanta. WMS has its main offices just outside Chicago, where Schweinfurth will remain.
During the company’s licensing hearing with Nevada gaming regulators last fall, Scientific Games officials committed to retaining WMS’ 145-person sales-and-service headquarters in Las Vegas, potentially growing the business unit.
“We like gaming and it’s a great industry,” Perelman said then.