IGT-SG bid secures Brazil's instant lottery concession

22 October 2019

Brazil’s Investment Partnership Programme (PPI) has awarded a consortium comprising International Game Technology and Scientific Games the tender to operate the state-owned instant win gaming business Loteria Exclusiva Instantânea (Lotex).

The 50-50 joint venture sees the two suppliers secure a 15-year contract to operate instant win games in the country, paying an initial BRL96.9m (£18.4m/€21.4m/$23.8m) to secure the contract.

This will be followed by seven instalments of BRL103.0m, valuing the contract at BRL817.9m. In return, it will pay 17% of annual revenue to the Brazilian government over the contract’s term.

“The award of the Brazilian Lotex concession represents an important step towards the privatisation of lottery instant games in Brazil, the world’s eighth-largest economy,” IGT International chief executive Walter Bugno and Pat McHugh, chief executive of Scientific Games’ Lottery division, said in a joint statement.

“We are excited and honored by this opportunity for IGT and Scientific Games to help define the evolution of instant lottery in Brazil through a 50-50 joint venture over the next 15 years,” they said.

“This business partnership will benefit the people and government of Brazil and brings together the vast experience and market leadership of global leaders in the instant game market to help position Lotex for success.”

The Brazilian government’s secretary for evaluation, planning energy and lottery Alexandre Manoel described the auction for the concession as “emblematic” of major changes to country’s lottery sector.

“It represents the break of a 58-year monopoly over the national lottery industry,” Manoel said. “It represents openness to competition and a paradigm shift for the country.”

The process to finalise the contract has not yet been completed, despite the SG-IGT joint venture, the Consórcio Estrela Instantânea, being the only bidder for the concession.

An appeals process in which losing bidders could challenge the decision was due to run until 2 December. However, the lack of competing bids means confirmation of the decision to name Consórcio Estrela Instantânea as the concessionaire could be brought forward from its original date of 23 December.

The revised tender process, launched in August this year, envisages the final contract being signed no later than 16 April, 2020.

Should this all go ahead, the final contract is expected to be signed no later than 16 April, 2020.

The process has been hit by a number of setbacks since plans to privatise Lotex, which is currently operated by the national bank Caixa Econômica Federal (CAIXA), were first unveiled in 2017.

The government initially looked to generate over BRL1bn through the tender, which prompted a number of prospective bidders to drop out of the process, while the operating terms were amended numerous times, leading to a number of delays and cancelled auctions, most recently in May this year.

In January 2020, newly-installed President Jair Bolsonaro pledged to complete the privatisation by the end of the first quarter of the year, only for a lack of bidders to halt the process. This prompted the PPI to amend the eligibility criteria for bidders, and allow the concession holder to pay fees over eight, rather than four, instalments.