A joint statement was issued by IGT Plc and Scientific Games Corporation (SGC) announcing the withdrawal of their consortium to run the exclusive LOTEX instant lottery concession in Brazil.
The lottery technology groups said they were unable to shape a ‘crucial distribution arangement’ with CAIXA Federal, the state-owned bank of Brazil and the incumbent retail distributor of lottery goods in Brazil.
Last October, BNDES, the national development bank of Brazil, granted its LOTEX concession to ‘Estrela Instantânea’, a consortium formed by IGT and SGC as the only bidding party to participate in the privatisation of LOTEX, after seven failed attempts.
The IGT-SGC consortium agreed to pay an upfront instalment of R$100 million (EUR 21 million) with Estrela Instantânea to secure a 15-year concession to replace CAIXA as the sole LOTEX instant win goods operating firm.
IGT and SGC reached a distribution deal with CAIXA, which the bank was unable to enforce by the concession deadline of 21 September, after seven months of diligent negotiations.
IGT and SGC say that their request for an extension of the procedure to Brazil’s federal officials has not been approved, leaving their consortium without a critical distribution network.
Walter Bugno, IGT EVP New Business and Strategic Initiatives said: “The 13,000 lottery retailers within the CAIXA network are fundamental to a successful launch of the instant ticket business in Brazil and without such a distribution network, the companies were not prepared to move forward.”
IGT and SGC followed a decision by the Supreme Court of Brazil on 30 September, which ruled that the federal government’s control of a lottery monopoly was unconstitutional.
The decision of the Supreme Court could change market conditions dramatically, paving the way for Brazil’s 26 states to create their own lottery services and products, thus bypassing LOTEX exclusivity.
Michael Conforti, President of Global Strategic Accounts, the Science Games executive, commented on the statement: “Despite being fully prepared to fulfill all of the financial and non-financial conditions precedent of the concession agreement, prudent capital management dictates that we withdraw from the process and re-evaluate the business case of implementing a lottery operations model in Brazil
“Should the Government of Brazil consider an extension of the process for CAIXA to authorize and execute a contract because of the high contribution potential of this venture to a number of government programs, we will explore the possibility of re-engaging in the process.”