The International Game Technology – Scientific Games consortium announced its withdrawal from the bidding process for the concession of the Brazilian instant lottery. Since last year, both companies were integrated to present a joint offer for the Exclusive Instant Lottery (LOTEX) of Brazil.
Both IGT and Sci-Games were attracted by the monopoly of the lottery business. The consortium was the only bidder in this privatization process launched by the country after previous attempts that proved to be very difficult to sell.
In a statement issued tuesday, the consortium announced it was withdrawing “from the process and would re-evaluate the business case of implementing a lottery operations model in Brazil.” However, he left open the possibility that “explore the possibility of participating in the process again”, if the government offers prior guarantees.
The consortium requested the government to support CAIXA Economica, the financial entity that operates the largest network of retail lotteries in Brazil and has around 13,000 points of sale.
After seven months of “diligent discussions”, the consortium said it had negotiated a distribution agreement with CAIXA. But CAIXA did not authorize it to be executed before the established deadline (september 21), despite the fact that the agreement was signed two months ago.
The government had already been announced by the consortium that it considered “critical” to maintain this distribution agreement if the LOTEX agreement worked. However, the consortium said it would be willing to return to the negotiating table if the government grants an extension of the stipulated deadline.
But, on the other hand, a new problem emerged last week. The Brazilian Supreme Court declared the federal government’s monopoly of the lottery unconstitutional. The court ruling established that there is nothing to prevent state governments from individually releasing their own lottery products in their jurisdictions.
One of the most attractive points of the LOTEX tender was the monopoly status of the business. Although the consortium has not said what it expects from the government on this decision, it is established that there will be a renegotiation of the terms of the concession. IGT and Sci-Games are likely to request a reduction in their financial commitments.
The consortium expected LOTEX to generate sales totaling BRL15b (US $ 2.7b) in the first five years. While the government would obtain 16.7% of these revenues.