Playtech shares plummet as TTB Partners pulls out of purchase process

TTB Partners does not intend to make a concrete offer to acquire Playtech “due to challenging underlying market conditions”.

Shares in the London-listed supplier collapsed by more than 20% in early trading following the announcement, from 521p at market close yesterday to as low as 413.2p this morning (14 July).

TTB Partners – a consortium of investors including Playtech shareholders which had until a 15 July deadline to announce its intention to make a firm offer – remains supportive of the supplier’s board, executive management team, business strategy and prospects, Playtech said.

The board added that it remains very confident about Playtech’s positive long-term prospects as the firm provided a trading update for the first half of 2022 showing adjusted EBITDA for the six months is expected to exceed €200m.

That would mark a significant improvement for the business year-on-year, with a growth rate of over 61% from H1 2021.

Playtech CEO Mor Weizer: “We remain confident in our long-term growth prospects and, in particular, our ability to benefit from the structured agreements that are already allowing Playtech to access newly opened gambling markets.”

Improved performance in the latest half, Playtech said, was driven by both the B2B and B2C sides of the business. B2B performance was driven by strong momentum in the Americas and strong performance across the firm’s wider B2B operations.

The results give the board “great confidence” in Playtech’s prospects for the full year 2022 and beyond, the supplier said, while it continues to consider options to maximise shareholder value with a sale no longer on the cards. 

In a note to investors, Peel Hunt analyst Ivor Jones said Playtech had seen “remarkably strong” trading in the first half of 2022, with the firm’s updated EBITDA expectations suggesting an upgrade in excess of 10% of Peel Hunt’s previous full year 2022 earnings forecast.

The investment bank continues to believe the valuation of Playtech has considerable upside, it said, and reiterated its Buy recommendation and 800p target price.

Earlier this week on 11 July, Playtech completed the all-cash sale of its Finalto financial division to Gopher Investments, after receiving regulatory approval for the deal in June. 

It will use the majority of the sale’s proceeds to repay its revolving credit facility, it said.

Now, following the collapse of a potential deal with TTB Partners – after a long saga involving several competing bidders – Playtech may turn its attention to its CaliPlay joint venture with Mexico-based Caliente Group.

Playtech chairman Brian Mattingley: “This process has shone a spotlight on the fundamental premium value of Playtech’s businesses and the board will continue to consider options to maximise value for all shareholders.”

Playtech owns a 39% stake in CaliPlay, thought to be worth around £700m, which has led to rumours that the business could carry out a US listing via a SPAC merger, enabling it to enter the US market more readily.

“Playtech carries strong momentum going into H2 2022 and continues to perform very well across its core B2B and B2C businesses,” said Playtech CEO Mor Weizer. 

“This performance reflects the quality of our market-leading technology offering and the hard work and commitment of our talented team. We remain confident in our long-term growth prospects and, in particular, our ability to benefit from the structured agreements that are already allowing Playtech to access newly opened gambling markets.”

In February, Weizer was excluded from all meetings and matters at Playtech related to M&A, including a potential bid from TTB Partners, after he admitted the prospect of joining forces with TTB Partners alongside former Playtech CEO Tom Hall.

Brian Mattingley, chairman of Playtech, added: “This process has shone a spotlight on the fundamental premium value of Playtech’s businesses and the board will continue to consider options to maximise value for all shareholders. Playtech is the leading technology company in the gambling industry, with an unrivalled quality and breadth of products. 

“The group’s B2B business continues to go from strength to strength while Snai is the number one sports brand across retail and online betting in the Italian market. We are confident that we have the right strategy and the right team in place to build on this strong start to the year and deliver for all our stakeholders.”