Gavin Isaacs named CEO of Scientific Games

This was the gaming industry’s worst-kept secret.

The appointment Tuesday of Gavin Isaacs as CEO of Scientific Games Corp. had long been expected.

Isaacs, 49, who had more than 15 years experience in top-level executive positions with three gaming equipment providers, had been serving as a consultant to Scientific Games Chairman Ronald Perelman, the company’s largest stockholder.

Last year, Isaacs helped engineer the $1.3 billion buyout of SHFL entertainment by Bally Technologies, leaving Isaacs on the sidelines with a noncompete clause in his contract agreement.

Scientific Games, which is based in New York, is one of world’s leading lottery equipment and service providers. The company entered the casino side of the gaming industry last year with its $1.5 billion purchase of WMS Industries, the third leading slot machine manufacturer.

When company board member Dennis Kennedy moved into Scientific Games’ CEO position in November, it was clear he was keeping the seat warm for Isaacs.

“Many had suspected Mr. Isaacs would join Scientific Games when his noncompete with Bally ended later this year,” Wells Fargo Securities gaming analyst Cameron McKnight said. “However, with the CEO announcement coming sooner than expected, and at a critical time for Scientific Games, we expect the stock to react positively.”

On a conference call Tuesday, Isaacs said he wanted to get a handle on both Scientific Games and WMS and create a set of common goals for both businesses “before making any major changes.”

Isaacs served as CEO of SHFL from 2011 until November. Previously, he held several executive positions with Sydney, Australia-based Aristocrat Technologies, including president of its American operations in Las Vegas. He was chief operating officer of Bally from 2006 to 2011.

Kennedy will remain with Scientific Games as executive vice chairman.

“Scientific Games has a skilled worldwide organization that is focused on improving performance and growth,” Isaacs said in a statement. “In collaboration with the entire Scientific Games team, I look forward to working together as we concentrate on creating and distributing innovative products and services to our customers, completing the integration of WMS and enhancing stockholder value.”

Deutsche Bank gaming analyst Carlo Santarelli told investors Isaacs has a successful track record in his previous jobs and is respected within the gaming industry. But he could have his work cut out for him with Scientific Games.

“We continue to see Scientific Games as a company with significant headwinds given equipment industry challenges, a levered balance sheet with limited free cash flow, and meaningfully elevated Wall Street consensus estimates,” Santarelli said.

Much of Scientific Games’ main operations are in suburban Atlanta. WMS has its main offices just outside Chicago. During the company’s licensing hearing with Nevada gaming regulators last fall, Scientific Games officials committed to retaining WMS’ 145-person sales-and-service headquarters in Las Vegas, potentially growing the business unit.

Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski told investors they should see improved relations with Scientific Games now that Isaacs is CEO.

“On the business management front, Mr. Isaacs has demonstrated an ability to promote free thinking, enhance the management of firm capital and improve overall cultural dynamics,” Wieczynski said.

Shares of Scientific Games gained $1.11, or 12.14 percent, to close at $10.25 on Tuesday as 5.3 million shares were traded on the Nasdaq, nearly four times normal volume.