While there has not yet been any type of official announcement about major changes coming to Scientific Games, the multi-faceted gaming operator has been making some adjustments that would seem to indicate otherwise. It was reported last month that Sci Games chairman Ronald Perelman wanted to get rid of his stake in the company, which currently sits at around 39%. It also took a $198-million hit in the second quarter of the year because of the coronavirus. While neither of those by itself would warrant speculation that something big is coming, add them to the latest announcement and a possible image begins to emerge. Sci Games submitted a filing (pdf) to the U.S. Securities and Exchange Commission (SEC) on Tuesday, guaranteeing lucrative severance packages for its top brass should a takeover occur.
The notice describes a “change in control” (CIC) plan that would give six top executives a generous amount of cash in the event Sci Games changed hands. Among those covered by the plan are CEO and President Barry Cottle, CFO Michael Eklund, Group CEOs Patrick McHugh and Matthew Wilson, Chief Legal Officer James Sottile and Chief Accounting Officer Michael Winterscheidt. The company’s plan states, “The CIC Plan provides that in the event an executive’s employment is terminated by the company within 18 months following a change in control without cause or by the executive for good reason, the executive would be entitled to cash severance payments equal to the sum of his base salary and severance bonus amount, multiplied by two in the case of Messrs. Cottle and Wilson, and one-and-a-half, in the case of the other executives.” If, for some reason, the severance pay doesn’t reach the same level as a performance bonus for that year, then the severance package will be increased to meet that performance bonus.
There’s speculation that the brass decided to implement the measures because of Perelman’s interest in dumping his shares. That, in itself, would seem to indicate that there might be some friction at the top and that, perhaps, not everyone is on the same page when it comes to how the company needs to work to move forward. It appears that maybe things aren’t as solid at the company as it tried to make things seem this past April when it announced that it had more than sufficient capital assets to get over the coronavirus.
It could just be that Sci Games’ past is coming back to haunt it. Calvin Ayre’s Rafi Farber laid out a solid argument in February for why the company’s track record over the past few years is a little suspect, and it might be that everything is coming to a head because of COVID-19. Maybe the salary cuts the top brass were willing to take this past March weren’t a result of a burning desire to support the company, after all.
