IGT Plc and Scientific Games Corporation (SGC) have published a joint statement confirming that they have withdrawn their consortium to operate Brazil’s exclusive LOTEX instant lottery concession.
The lottery technology groups cited that they have been unable to form a ‘crucial distribution arrangement with CAIXA Federal’, Brazil’s state-owned bank and the incumbent retail distributor of lottery products across the country.
Agreed upon last October, following seven failed attempts BNDES – Brazil’s national development bank – awarded its LOTEX concession to ‘Estrela Instantânea’ – a consortium formed by IGT and SGC as the only bidding party to compete in the LOTEX privatisation.
The IGT-SGC consortium agreed to pay an upfront instalment of R$100 million (€21m) with Estrela Instantânea securing a 15-year concession to replace CAIXA as the exclusive operating firm of LOTEX instant win products.
Following seven months of ‘diligent discussions’, IGT and SGC negotiated a distribution agreement with CAIXA, which the bank was unable to execute by the concession deadline of 21 September.
IGT and SGC inform that their request to Brazil’s federal officials for an extension of the process was not granted, leaving its consortium without a vital distribution network.
“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,” said Walter Bugno, IGT EVP New Business and Strategic Initiatives.
Further contract complications saw IGT and SGC observe a 30 September ruling by Brazil’s Supreme Court, which judged that the federal government ownership of a lottery monopoly was unconstitutional.
The Supreme Court’s decision may drastically alter market conditions, paving the way for Brazil’s 26 states to develop their own lottery services and products – therefore bypassing LOTEX exclusivity.
Scientific Games executive Michael Conforti, President of Global Strategic Accounts, commented: “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.”