Scientific Games Corporation and IGT Plc have released a joint statement confirming that both entities have withdrawn from the ‘Estrela Instantânea’ consortium to operate Brazil’s exclusive LOTEX instant lottery concession.
The disengagement follows a breakdown in talks with CAIXA Federal, Brazil’s state-owned bank, and the retail distributor of lottery products across the country, over the signing of a ‘crucial distribution arrangement.
Walter Bugno, IGT EVP New Business and Strategic Initiatives. and Michael Conforti, Scientific Games President Global Strategic Accounts, commented: “Since receiving the award of the LOTEX Concession, the parties repeatedly informed the Government of Brazil that it was critical, to ensure the success of the national instant ticket business in Brazil, to have a signed distribution agreement with CAIXA Econômica, operator of the largest lottery retailer network in Brazil.
“However, despite reaching an agreement on the final version of the contract more than two months ago, CAIXA failed to authorize its execution by the concession deadline, and our request for an extension of the process was not granted. 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.”
As both parties alluded to, IGT and Scientific Games, under its Estrela Instantânea consortium, agreed a deal to be awarded LOTEX by Brazil’s national development bank (BNDES) last October, following seven failed attempts.
The consortium agreed to pay an upfront instalment of R$100m (€21m) with Estrela Instantânea securing a 15-year concession to replace CAIXA as the exclusive operating firm of LOTEX instant win products.
The statement continued: “Despite being fully prepared to fulfil 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.”
In addition, further contract complications saw IGT and SGC observe a September 30 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.