Will Vicars’ Caledonia makes $1bn bet on US gaming group Scientific Games

Sydney private investment firm Caledonia has splashed out more than $1bn on US gaming and slots-machine group Scientific Games.

Caledonia chief investment officer Will Vicars.

Sydney private investment firm Caledonia has doubled down on its bet on global wagering and gambling-related stocks, splashing out more than $1bn on US gaming and slots-machine group Scientific Games.

Caledonia’s latest play, overseen by chief investment officers Will Vicars and Michael Messara, will result in it emerging with a reported 39 per cent stake in the Las Vegas-based provider of gambling products and services such as poker machines. It adds to the group’s already large holding in London-listed bookmaker Flutter Entertainment, global owner of the Australian betting brand Sportsbet, and Nasdaq-listed fantasy sports and betting operator Draftkings.

The Scientific Games play, reported by Bloomberg and the ­Financial Times as Caledonia paying a significant premium to the firm’s share price at Friday’s close, will see Caledonia buy the roughly 39 per cent stake held by US billionaire Ronald Perelman.

Caledonia is understood to have won an auction for the stake, and would reportedly get two board seats as part of the transaction that would result in Mr Perelman, a famed corporate raider who came to prominence in the 1980s, making another exit from an investment. He told Vanity Fair last month he wanted a “less complicated and less leveraged business life” and has been shedding staff at his ­MacAndrews & Forbes investment firm and selling assets.

Shares in Scientific Games have more than halved in the past two years and were hit hard earlier this year with the closure of gambling venues in Las Vegas and elsewhere due to COVID-19, though they have recovered some losses since late March. Mr Vicars and Mr Messara have become significant players in the global gambling stocks, emerging as a big shareholder in the Toronto-listed The Stars Group before its huge $US12bn merger with Flutter in a deal completed in May.

They are said to now hold a stake worth more than $2bn in Flutter. The Australian reported in June that Flutter was now a 30 per cent position in Caledonia’s flagship fund, above the 25 per cent target for maximum position size.

Mr Vicars, a member of The List — Australia’s Richest 250, told investors he planned to make a distribution from the flagship fund to the co-investment fund, most likely at the end September, due to the success of Caledonia’s Flutter stake.

Caledonia is said to have made a 38 per cent return in the year to June 30, including being up 28 per cent alone in the last quarter of the 2020 financial year.

The Scientific Games buy is a continuation of about four key themes that have emerged in the Caledonia portfolio: gambling, sports and entertainment, real ­estate and financial services — though Caledonia has a stake of more than $1.5bn in US food ­delivery service Grubhub and shareholdings in two online car classifieds companies.

Many of the holdings are ­focused on the US and North American markets. Flutter is strong in Europe with its Paddy Power brand and Sportsbet recently announced a profit of almost $200m in Australia for the six months to June. But Flutter’s merger with The Stars Group also means it has the FoxBet online sportsbook and Fanduel daily fantasy sports brands in the US, where more states are expected to legalise betting on sports.

The exposure to gambling stocks also marries with a string of investments Caledonia has made in sports and entertainment-­related shares. It has more than $1bn invested in Liberty Media Formula One, the owner of the global motor racing series, and wrestling business WWE. There are also significant holdings in Warner Music, after Caledonia took a 6 per cent stake in the music streaming business’s IPO mid-year, and Live Nation events business.

But Caledonia’s biggest holdings is the almost $6bn stake it holds in US real estate business Zillow, which along with Flutter and Grubhub provide the cornerstones of its equities portfolio.

The firm also has about $400m, according to Bloomberg data, in three other property or real estate-related stocks: the ASX-listed ALE Property Group, which owns Australian pubs; the London-listed estate agency Foxtons Group; and US construction and heavy materials business Martin Marietta Materials.

Caledonia’s other big industry is financial services. Among its holdings in the sector are Australian firm Challenger Financial Group, in which it has about $450m worth of stock, and foreign exchange company Interactive Brokers, which is listed on the Nasdaq.

It also has shares in global exchange, clearing house and financial data firm Intercontinental Exchange.