Scientific Games to purchase MDI Entertainment for 4.0 times revenue

Weekly Corporate Growth Report, Mar 4, 2002

The Deal: Scientific Games Corporation has agreed to acquire all outstanding shares of MDI Entertainment Inc. (except for the 708,333 shares that Scientific Games already owns) by exchanging its shares for MDI shares at $2.10 per MDI share (a total deal value of approximately $22 million). The deal still requires approval from Iv>DI shareholders. If the deal goes through, MDI will become a wholly owned subsidiary of Scientific Games and will continue to operate as an autonomous business.

Discussion: MDI Entertainment holds the lottery advertising rights to about 35 entertainment properties, including Wheel of Fortune, Harley Davidson, The Pink Panther, and Betty Boop. The company creates promotions around the properties, licenses them to state lottery organizations, and sells related merchandise for use as prizes.

Scientific Games, formerly known as Autotote, is a leading maker and operator of pari-mutuel wagering equipment and online and instant ticket lottery systems. (Pari-mutuel wagering refers to gambling systems where multiple winners split the winnings, such as lotteries.) The company makes terminals that record bets and calculate odds at racetracks, sporting events, and off-track betting establishments.

By purchasing NMI, Scientific Games will expand the range of services it provides to the lottery industry. Lotteries using branded tickets and merchandising are believed to attract new, younger players and to increase sales.