IGT and Scientific Games were advised by TozziniFreire Advogados.
The contract provides for a collection of BRL 5 billion ($1.045 billion) with a minimum transfer goal of BRL 500 million ($104.5 million) to the state. IGT and Scientific Games will lead the consortium’s operation of the instant ticket and passive lottery business in Minas Gerais and will jointly provide the planning and production of instant games, while Scientific Games will provide the software requirements and management system.
This operation, which concluded on 15 May, is the first instance of the operations of a Brazilian state lottery being awarded to a private operator since the Federal Supreme Court’s 2020 ruling that states may explore lottery activities. Lottery games are currently the only legalised form of gambling in Minas Gerais, with only keno games and a national draw presently on offer in the state. The new contract, which went into effect on 9 June, will allow the consortium to create further offerings in the gambling industry through the launch of instant paper tickets and related services. The consortium has expressed optimism that it will be able to launch instant games by the end of 2023.
Guimarães & Vieira de Mello Advogados advised Saga with a team comprising partners Marcello Viera de Mello and Helder Fonseca and associate Anna Florença Anastasia.
An Interview with Marcello Viera de Mello at Guimarães & Vieira de Mello Advogados:
Can you please tell us more about the background to this deal and the role that your team played in seeing it to completion?
We have been advising Saga for over 10 years. Saga is the sole controller of the only lottery operation conceded by a Brazilian state to a private company (Intralot do Brasil) after it purchased the shares of its partner (Intralot SA), a deal on which we also advised. The state of Minas Gerais decided to grant a new concession, this time for instant and passive lotteries (physical tickets) and Saga joined forces with two multinational companies in this sector, SGI and IGT, to participate in the public tender.
GVM advised Saga since the conception of this joint effort. Our corporate law team helped to structure the format of the partnership and the initial documents as well as the formation of the consortium, and our administrative law team participated afterwards, giving legal advice during the process of the public tender.
What were the key considerations and challenges that you faced while advising Saga on the formation of the consortium?
Going in, we knew that we would face some challenges since the state lottery market in Brazil is still incipient. Many states have tried to concede the service to private companies and failed, as was the case with the state of Sao Paulo. Not only that, we had to align the interests of our client, a company that operates only in Brazil, with those of two large groups that operate all over the world but did not have a broad practical experience in the Brazilian market.
What impact do you expect the formation of this consortium will have on the gambling industry in Brazil?
The lottery market in Brazil is largely dominated by the federal government, which uses a state-owned bank named Caixa to explore it. In fact, many states were not allowed to have their own lotteries and others had the legality of their lotteries questioned. Then in 2020, the Brazilian Supreme Court ruled upon the matter in a leading case, recognising that it was legal for every one of the 26 Brazilian states and the federal district to each have their own lottery.
[ymal]
So, there is a likelihood for this market to expand exponentially, but many states are still struggling with the format they should adopt. A successful operation by the consortium in Minas Gerais will certainly inspire other states to follow the same path and partner with private players.
Just recently, Saga – through its subsidiary – started the only online sports betting operation that is official in Brazil, which GVM advised with the regulatory aspects. So, this market needs to mature and we hope the consortium helps it to do so.
