8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 11, 2020

SCIENTIFIC GAMES CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	81-0422894
(State of incorporation)	(IRS Employer
	Identification No.)

001-11693

(Commission File Number)

6601 Bermuda Road, Las Vegas, Nevada 89119

(Address of principal executive offices) (Zip Code)

(702) 897-7150

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $.001 par value	SGMS	The The Nasdaq Stock Market LLC Stock Market
Preferred Stock Purchase Rights		The The Nasdaq Stock Market LLC Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

☐   Emerging growth company

☐  If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Item 1.01 Entry into a Material Definitive Agreement.

On September 11, 2020, certain affiliates of MacAndrews and Forbes Incorporated (“M&F”) entered into a Stock Purchase Agreement (the “SPA”) with Pivot Buyer LLC, an affiliate of Caledonia (Private) Investments Pty (“Caledonia”), pursuant to which a number of investors, including Caledonia, agreed to purchase shares of Scientific Games Corporation’s (the “Company”) common stock (the “Common Stock”) held by M&F equal to 34.9% of the Company’s outstanding Common Stock in four tranches (the “Stock Purchase”).  Pursuant to the SPA, each of Ronald O. Perelman, Barry F. Schwartz and Frances F. Townsend resigned from the Board of Directors of the Company (the “Board”) effective as of the closing of the initial tranche of the Stock Purchase. Once the Stock Purchase is completed, no investor is expected to beneficially own more than 9.9% of the outstanding Common Stock of Scientific Games.

Concurrently with the execution of the SPA, the Company entered into an agreement with M&F, dated September 11, 2020 (the “M&F Agreement”), pursuant to which the parties agreed to the termination of the existing stockholders’ agreement between the Company and M&F (the “Stockholders’ Agreement”), except with respect to registration rights (the “Stockholders’ Agreement Termination”), effective as of the closing of the fourth tranche contemplated by the SPA (the “Fourth Closing”). Mr. Schwartz has been appointed as a non-voting observer of the Board from the closing of the first tranche contemplated by the SPA (the “First Closing”) and generally until the Fourth Closing. If the Fourth Closing does not occur by November 10, 2020, the M&F Agreement provides that the Board will appoint Mr. Schwartz as a director on the Board until the Fourth Closing. M&F otherwise waived its rights to appoint any directors to the Board during the term of the M&F Agreement. The M&F Agreement will automatically terminate in the event the SPA is terminated without the consummation of the Fourth Closing.

In addition, and in connection with the SPA, the Company simultaneously entered into an agreement with Caledonia, dated September 11, 2020 (the “Caledonia Agreement”), pursuant to which the Company and Caledonia agreed to the Stockholders’ Agreement Termination. The Company and Caledonia also agreed to cooperate with each other to obtain any applicable approvals from gaming authorities in connection with the SPA and the transactions contemplated therein.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Resignation and Election of Directors

As noted above, in connection with the Stock Purchase, each of Ronald O. Perelman, Barry F. Schwartz and Frances F. Townsend resigned from the Board, effective as of September 16, 2020.  Immediately following such resignations, each of Jamie R. Odell and Antonia Korsanos were elected as directors on the Board, effective as of September 16, 2020.  Mr. Odell will serve as Executive Chair of the Board and Ms. Korsanos will serve as Executive Vice Chair of the Board.

Mr. Odell previously served as Chief Executive Officer (“CEO”) of Aristocrat Leisure Limited (“Aristocrat”) from 2009 to 2017.  Prior to joining Aristocrat, Mr. Odell held senior executive roles in the global beverage industry. Since May 2019, Mr. Odell has served as a consultant to the Company with the title of Special Advisor to the Chairman and CEO.

Ms. Korsanos previously served as the Chief Financial Officer (2009-2018) and Company Secretary (2011-2018) of Aristocrat. Prior to joining Aristocrat, Ms. Korsanos held senior leadership roles in the consumer goods industry, including at Goodman Fielder and Kellogg’s. Since July 2019, Ms. Korsanos has served as a consultant to the Company with the title of Advisor to the CEO.

As noted above, each of Mr. Odell and Ms. Korsanos are currently engaged as consultants to the Company. The existing consulting agreements and related compensation arrangements between the Company and each of Mr. Odell and Ms. Korsanos, in each case, effective as of the date the applicable individual commenced providing consulting services to the Company, provide for the following in exchange for the consulting services provided by the applicable individual:

● In the case of Mr. Odell, he is entitled to a $600,000 annual consulting fee and he received (i) a sign-on grant of 10,000 restricted stock units with respect to the Common Stock (“RSUs”), vesting 25% on each of the first four anniversaries of the grant date and (ii) a sign-on grant of 30,000 performance-vesting options to acquire Common Stock, vesting based on the achievement of certain performance criteria measured over the twelve-month period ending March 31, 2021; and

● In the case of Ms. Korsanos, she is entitled to a $350,000 annual consulting fee and she received (i) a sign-on grant of 10,000 RSUs, vesting 25% on each of the first four anniversaries of the grant date and (ii) a sign-on grant of 30,000 performance-vesting options to acquire Common Stock, vesting based on the achievement of certain performance criteria measured over the twelve-month period ending June 30, 2021.

Other than the compensation described above, Mr. Odell and Ms. Korsanos currently do not receive any other compensation from the Company, whether in their director roles or otherwise. In particular, Mr. Odell and Ms. Korsanos do not currently receive the standard compensation provided to members of the Board (as described in the Company’s proxy statement filed with the Securities and Exchange Commission on April 28, 2020).

Item 7.01. Regulation FD Disclosure.

On September 14, 2020, the Company issued a press release announcing the Stock Purchase and the election of Mr. Odell and Ms. Korsanos to the Board. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information contained in this Item 7.01 as well as in Exhibit 99.1 is furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and such information shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act.

Item 9.01. Financial Statements and Exhibits.

 (d) Exhibits

Exhibit No.	Description
99.1	Press Release of Scientific Games Corporation, dated September 14, 2020.
101	Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SCIENTIFIC GAMES CORPORATION
Date: September 16, 2020	By:	/s/ James Sottile
		Name:	James Sottile
		Title:	Executive Vice President and Chief Legal Officer

EX-99.1

Exhibit 99.1

Scientific Games Announces Institutional Investors, including

Caledonia, to Acquire 34.9% Shareholding from

MacAndrews & Forbes

● Respected Gaming Industry Leaders Jamie Odell and Toni Korsanos to Become New Executive Chair and Executive Vice Chair, Respectively

● Refreshed Board to Comprise Majority of Independent Directors Focused on Making Scientific Games Attractive to Institutional Investors

● New Board to Oversee and Help Implement Transformative Strategies to Optimize Business Portfolio and Shareholder Value

● Strategies to Include Accelerating Debt Reduction Efforts and Increasing Focus on Digital Gaming and Sports Betting Growth Opportunities

LAS VEGAS – September 14, 2020 – Scientific Games Corporation (NASDAQ: SGMS) (“Scientific Games” or the “Company”) today announced that a number of long-term institutional investors, including highly credentialed gaming industry investor Caledonia, have reached agreement to acquire a 34.9% stake in Scientific Games from MacAndrews & Forbes Incorporated (“MacAndrews & Forbes”) at a price of $28.00 per share. In connection with the transaction, Scientific Games is implementing a series of governance changes and enhancements, including refreshment of its Board of Directors and termination of the Stockholders Agreement with MacAndrews & Forbes, to reflect its new investor base and continue to position the Company for growth and value creation.

Barry Cottle, President and CEO of Scientific Games, said, “Scientific Games is well-positioned for future success given our industry leading portfolio of products and technologies, loyal customer base and talented leadership team. We are pleased to have the support of our refreshed Board and new investor base as we continue to execute on our strategy to drive meaningful long-term growth and shareholder value creation.”

New Board of Directors to Oversee and Help Implement Transformative Strategies to Optimize Business Portfolio

The Scientific Games Board will be reconstituted to include all existing directors, other than the MacAndrews & Forbes representatives, as well as three new directors. The Board will comprise a majority of independent directors with a deep and diverse mix of gaming industry, financial, strategic and operational experience.

Former Aristocrat Chief Executive Officer Jamie Odell, along with former Aristocrat Chief Financial Officer Toni Korsanos, will join the Scientific Games Board as Executive Chair and Executive Vice Chair, respectively. They will be joined on the Board by an additional independent non-executive director. Ronald Perelman, current Executive Chairman of the Scientific Games Board and MacAndrews & Forbes Chairman and CEO, as well as Barry Schwartz and Frances Townsend, the two other MacAndrews & Forbes representatives, will resign from the Board.

During Mr. Odell’s tenure as CEO of Aristocrat from 2009 to 2017, Aristocrat's market capitalization increased from $1.3 billion to approximately $7.5 billion and achieved leading market share positions in digital, Class II and Class III gaming. Mr. Odell and Ms. Korsanos currently serve as senior advisors to the Scientific Games Board and work with Mr. Cottle to develop and support the Company’s current growth strategies.

Mr. Odell said, “I am excited to become the Executive Chair of Scientific Games and work alongside the Company’s world-class leadership team at such an important time for both the Company and the broader gaming industry. The Company possesses a market leading portfolio of products and a differentiated position in the emerging digital gaming and sports betting industries.”

Continued Mr. Odell, “Scientific Games will have the support of a highly credentialed and experienced investor base, including Caledonia, as we implement transformative initiatives to optimize the asset portfolio and unlock the full potential of the Company’s best-in-class collection of products and technologies. We will be highly focused on rapidly de-leveraging the balance sheet and creating a flexible, agile company that is poised to capitalize on evolving industry and macroeconomic trends to deliver outsized returns to investors.”

Mr. Cottle said, “Jamie is a true leader and visionary in gaming and has been a trusted advisor to the Company and the Scientific Games Board. I am thrilled to partner with Jamie and Toni to shape a bright future for Scientific Games. Their support is a testament to the faith they have in our business and team. I want to thank Ronald and MacAndrews & Forbes for their support since 2003 and Barry and Fran for their contributions as directors.”

“As gaming industry revenues continue to recover, we believe Scientific Games is poised to benefit from a renewed wave of growth given our position at the forefront of the rapidly expanding digital gaming and sports betting ecosystem and our vast portfolio of original content and licensed brands,” added Mr. Cottle. “We are committed to maintaining our position as the preferred partner to the leading casino and sports betting operators across the United States and around the world by delivering unparalleled customer service and continuing to innovate our leading technology and product portfolio.”

Termination of Stockholders Agreement

Upon completion of the transaction, the Stockholders Agreement with MacAndrews & Forbes will be terminated and all rights held by MacAndrews & Forbes, other than registration rights, will no longer be in effect. This includes any rights to appoint directors to the Scientific Games Board. Following the transaction, the Company’s corporate governance provisions will be in line with typical publicly traded companies. No investor is expected to beneficially own more than 9.9% of the Company’s shares as a result of the transaction.

Timing & Approvals

The transaction between the investing parties and MacAndrews & Forbes is expected to be executed in multiple tranches after which no investor is expected to beneficially own more than 9.9% of the outstanding shares of Scientific Games. The first tranche sale is expected to be completed today and the transaction is expected to be fully completed over the next several weeks. The changes to the Scientific Games Board become effective upon the first tranche sale.

Reaffirming Guidance

On April 14, 2020, the Company issued a press release stating that “[f]or 2020 as a whole, the Company now anticipates that capital expenditures will be in the range of $210-240 million.” This guidance was reiterated on July 23, 2020 in our second quarter earnings release. We continue to expect capital expenditures for 2020 as a whole to be in the range of $210-240 million.

On May 11, 2020, in the question and answer portion of our first quarter earnings call, the Company communicated that the second quarter was expected to be its lowest revenue quarter for the year. With most casinos now reopened with encouraging early results, we continue to believe that revenues will increase from the second quarter’s results. Also on May 11, 2020, the Company communicated that we believed we would be close to cash flow positive by the end of the year. In the first half of the year the Company generated free cash flow, a non-GAAP financial measure, of $64 million, including $5 million of positive free cash flow in the second quarter due to the strength of our diverse portfolio. We currently expect to be free cash flow positive for the full year 2020.

Advisors

Macquarie Capital (USA) Inc. acted as lead financial advisor and Oaktower Partnership acted as co-financial advisor to the new institutional investors while Kirkland & Ellis LLP acted as lead legal advisor and Greenberg Traurig, LLP acted as regulatory counsel.Odell and Korsanos were advised by Jarden Australia Pty Limited. Deutsche Bank Securities Inc. acted as financial advisor to MacAndrews & Forbes and Wachtell, Lipton, Rosen & Katz acted as legal advisor.

About Caledonia

Founded in 1992, Caledonia is a global investment management firm and has a concentrated, high conviction and long-term investment approach. Caledonia has significant and deep experience in the global gaming sector, including a US$2.5 billion shareholding in Flutter Entertainment currently. Over the last 15 years, Caledonia has had significant investments in Aristocrat, including being the largest institutional shareholder for much of the last 5 years. Caledonia’s other current gaming investment is DraftKings.

About Scientific Games

Scientific Games Corporation (NASDAQ: SGMS) is a world leader in entertainment offering dynamic games, systems and services for casino, lottery, social gaming, online gaming and sports betting. Scientific Games offers the gaming industry's broadest and most integrated portfolio of game content, advanced systems, cutting-edge platforms and professional services. Committed to responsible gaming, Scientific Games delivers what customers and players value most: trusted security, engaging entertainment content, operating efficiencies and innovative technology. For more information, please visit scientificgames.com.

Investor Inquiries:

IR@scientificgames.com

U.S. Media Inquiries:Andy Brimmer and Nick Lamplough, Joele Frank, Wilkinson Brimmer Katcher, +1 212 355 4449

Australia Media Inquiries:

Brett Clegg, Citadel-MAGNUS, +61 487 436 985

Forward-Looking Statements

In this press release, Scientific Games makes “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, guidance, plans, results or strategies and can be identified by words such as “will,” “may,” “should,” “continue,” “believe,” “expect,” “anticipate,” or similar technology. These statements, including, but not limited to, those related to the Company's expected capital expenditures, revenues and free cash flow for 2020, are based upon management's current expectations, assumptions and estimates and are not guarantees of timing, future results or performance. Therefore, you should not rely on any of these forward-looking statements as predictions of future events. Actual results may differ materially from those contemplated in these statements due to a variety of risks, uncertainties and other factors, including those factors described in our filings with the Securities and Exchange Commission (the “SEC”), including Scientific Games’ current reports on Form 8-K, quarterly reports on Form 10-Q and its latest annual report on Form 10-K filed with the SEC on February 18, 2020 (including under the headings “Forward-Looking Statements” and “Risk Factors”). Forward-looking statements speak only as of the date they are made and, except for Scientific Games' ongoing obligations under the U.S. federal securities laws, Scientific Games undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

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