Scientific Games Announces Its Joint Venture Selected to Provide Marketing and Sales Services to the New Jersey Lottery
NEW YORK, April 15, 2013 /PRNewswire/ -- Scientific Games Corporation (Nasdaq: SGMS) today announced that the New Jersey Treasury Department has issued a notice of intent to award a contract to the Northstar New Jersey Lottery Group ("Northstar NJ") to provide marketing and sales services to the New Jersey Lottery. Northstar NJ is a joint venture comprised of Scientific Games International, Inc., GTECH Corporation, a subsidiary of Lottomatica Group S.p.A. (LTO.MI), and OSI LTT NJ Holdings Inc., an indirect subsidiary ofOMERS Administration Corporation, the administrator of the Ontario Municipal Employees Retirement System pension funds (OMERS). A subsidiary of Scientific Games will own approximately 18% of the Northstar NJ joint venture. An entity comprised of GTECH and OSI will own approximately 82% of the Northstar NJ joint venture.
Northstar NJ will provide a wide range of specialized services to the Lottery that will focus on strengthening its marketing and sales functions and will include support for lottery game development, the procurement of related goods and services and marketing and advertising. All of these activities will be subject to control and oversight by the Lottery. The services agreement is expected to commence after a transition period and is expected to end on June 30, 2029.
Under the terms of the contract, Northstar NJ will be entitled to receive incentive payments to the extent the Lottery's net income exceeds specified target levels, subject to a cap of 5% of the applicable year's net income. Northstar NJ will be responsible for payments to the State to the extent the Lottery net income levels set forth in Northstar NJ's successful bid are not achieved, subject to a cap of 2% of the applicable year's net income and a $20 million shortfall payment credit. Northstar NJ will also be required to make a $120 million payment to the State upon execution of the agreement.
Scientific Games and GTECH will provide Northstar NJ with instant lottery games, lottery systems and services along with a player loyalty and rewards program. Under the terms of a separate joint venture arrangement between Scientific Games and GTECH and supply arrangements with Northstar NJ, Scientific Games will have a 30 percent economic interest (and be responsible for 30 percent of the capital requirements) associated with such supply arrangements.
"We look forward to proving how meaningful a commercial lottery business model can be to the State of New Jersey and its residents," stated A. Lorne Weil, Chairman and Chief Executive Officer of Scientific Games. "We have been a long-time partner of the New Jersey Lottery, including launching the industry's first internet-based second chance drawing in 2001 for the New Jersey Lottery. We are proud to continue to be a part of the Lottery's progressive efforts in establishing itself as an industry leader in terms of both performance and innovation."