Scientific Games Corp. on Friday tapped former Norwegian Cruise Line Holdings Ltd. Chief Executive Officer Kevin Sheehan as new CEO and president.
Current Scientific Games CEO and President Gavin Isaacs will become vice chairman of the board of directors.
Though Sheehan served as CEO of Norwegian for seven years and successfully guided the cruise-line operator through an initial public offering in 2013, his lack of experience in gaming may lead some investors to question his appointment, according to Steven Wieczynski, an analyst at Stifel Nicolaus & Co.
“Given Mr. Isaacs’s ‘cult’ status amongst gaming investors, we sense there are some owners who stayed loyal to the stock because of his direct oversight, who may now be more compelled to exit the name,” Wieczynski wrote in a note Friday.
Shares of Scientific Games plunged $1.43, or 14.09 percent, to $8.72.
At Norwegian Cruise Line, Sheehan helped the company deliver a turnaround in profitability in the midst of a tough economic climate. Prior to working on the cruise line, Sheehan worked at Cerberus Capital Management as senior adviser in the assessment of multi-billion acquisition targets.
The Nevada-based gaming-equipment maker controlled by billionaire Ronald Perelman earlier Friday posted revenue of $729.2 million for the quarter, beating analysts’ average projection of $709.4 million. Operating income increased to $46.7 million from a loss of $800,000 in the year-ago period.
Isaacs had been chief executive of Scientific Games since June 2014.
While the change in CEO was expected after a period of M&A activity and subsequent integration, Isaacs is “extremely well-respected in the equipment industry,” Wells Fargo analyst Cameron McKnight wrote in a note Friday.
Sheehan takes over a highly leveraged company at a time when the industry is grappling with a slower pace of casino openings and tepid machine-replacement orders. Scientific Games made a couple of high-profile acquisitions in the past several years to create one of the biggest global players in the lottery and casino-supply business.
The deals, for Bally Technologies Inc. and WMS Industries Inc., had boosted Scientific Games’ debt to $8.4 billion at a time when consumers are betting less on slots and some in the industry wonder if young people will take to gambling like their parents did.
Review-Journal writer Nicole Raz contributed to this report.