The Playtech acquisition saga looks set to continue a while longer after the supplier extended the deadline by which TTB Partners must lodge a formal offer.
TTB Partners, a Hong Kong-based investment consortium, was released from Takeover Code rules preventing it from putting in an offer for Playtech on 20 May.
The group was given an original deadline of 5pm today (17 June) to either announce its firm intention to make an offer for the business, or to declare that it does not intend to put in a bid.
However, the supplier announced this morning that it has extended the deadline for TTB to make an offer until 5pm on 15 July, following a request to the UK’s Panel on Takeovers and Mergers from an independent committee formed of Playtech board members.
Playtech said the extension was requested because discussions with TTB are still ongoing, and “progress continues to be made.”
“At present, the Independent Committee believes allowing additional time for discussions to further develop is in the best interests of the company’s shareholders and other stakeholders,” it added.
Following the announcement, Peel Hunt analyst Ivor Jones reiterated an 800p target price for Playtech shares and told investors: “We take today’s announcement of an extension as an encouraging sign that there may yet be an acceptable bid.”
He added: “A takeover is not the only option open to Playtech to release value, and we reiterate our Buy recommendation and 800p target price.”
Peel Hunt: “We take today’s announcement of an extension as an encouraging sign that there may yet be an acceptable bid.”
Earlier this week, Playtech announced it had received all necessary regulatory approvals for the all-cash, $250m sale of its Finalto financial trading division to Gopher Investments.
That deal is now expected to complete on 30 June, with Playtech describing the transaction as a significant step in its strategy to simplify the group and focus on its technology-led gaming offering.
A successful bid from TTB Partners could see current Playtech CEO Mor Weizer and former CEO Tom Hall secure a significant stake in the business, after it was confirmed in February that the pair had approached the investor group to explore the possibility of collaborating on an offer.
Following that revelation, Playtech’s board of directors formed an independent committee excluding Weizer, to consider all matters relating to any possible acquisition offer from TTB.
Playtech said the new bid deadline of 15 July may still be extended further, but only given the consent of the Panel on Takeovers and Mergers.
Playtech shares are trading higher today (15 June) after the supplier received all required regulatory approvals for the sale of its Finalto financial trading division to Gopher Investments.
The sale was agreed in September last year, with an all-cash price of $250m approved by Playtech shareholders at the firm’s general meeting in December.
In line with the agreement with Gopher, Playtech said it expects the sale to complete on 30 June.
The supplier added that the completion of the transaction is a significant step in its strategy to simplify the group and focus on its technology-led offering as a ‘pureplay’ gambling business across B2B and B2C.
Playtech’s overall business remains a candidate for acquisition, despite a 680p per share offer from Australian supplier Aristocrat collapsing earlier this year.
In the wake of that deal falling through, TTB Partners – which had advised Gopher Investments on its acquisition of the Finalto division – was released from Takeover Code restrictions which would otherwise have prevented it from making an offer for the business.
Peel Hunt analyst Ivor Jones: “Shorn of Finalto, the B2B and B2C arms of the group should be attractive targets in this M&A-driven sector, and we still hope to see a route into the US for Caliente.”
Playtech CEO Mor Weizer, and former director and CEO Tom Hall, were subsequently confirmed to have approached TTB in order to explore the possibility of participating and collaborating over a future offer to buy Playtech.
As a result, Weizer was excluded from an independent committee formed by Playtech’s other directors to assess any M&A proposals at the business.
An update on the Playtech acquisition saga is expected on Friday, which marks the 17 June deadline by which TTB Partners must place a formal bid for the firm, if indeed it chooses to make one.
On TTB, Peel Hunt analyst Ivor Jones said in a note to investors: “We will not be too despondent if no bid emerges – Playtech has been trading strongly but not able fully to set out its investment stall while subject to a bid.
“Shorn of Finalto, the B2B and B2C arms of the group should be attractive targets in this M&A-driven sector, and we still hope to see a route into the US for Caliente.”
Playtech said in its Q1 2022 financial report that “positive progress” had been made in discussions with TTB, but that there could still be no certainty as to whether a concrete offer would be forthcoming.
Playtech grew full-year revenue from continuing operations by 11.8% in 2021 as the firm’s diverse business divisions brought in €1.21bn.
Of the total, €554.3m came from Playtech’s core B2B gambling offering, up 12.0% year-on-year, while the B2C segment generated the majority of revenue at €663.7m, up 11.3%.
B2C revenue was driven principally by the Snaitech brand in Italy at €584.7m.
B2B revenue was split more evenly across the globe, with the UK, Mexico and the Philippines delivering €132.2m, €90.3m and €67.6m, respectively.
Other key markets for B2B included Malta, Italy and Gibraltar, which generated €52.3m, €30.7m and €27.9m, respectively.
A variety of markets around the world delivered the remainder, including Spain, Netherlands, Colombia, Romania and Norway – in addition to €60.2m from the supplier’s Rest of World segment, which includes Latam and its budding US operations.
Playtech said its overall growth was driven by “very strong” online performance, more than offsetting the impact of Covid-19 lockdowns which, for instance, had a negative impact on the retail revenue of Playtech’s business in Italy.
The supplier ended the year with EBITDA of €281.3m, an increase of 26.2% over 2020.
Thanks to a further €583.2m in unrealised fair value changes of derivative financial assets – relating to options held by Playtech in various Latam-facing businesses including Caliente in Mexico and Wplay in Colombia – the company declared full-year profit before taxation of €605.0m, up from a €52.7m net loss in 2020.
After an income tax credit worth €81.7m, Playtech declared overall profit from continuing operations of €686.7m. Following a loss from discontinued operations of €12.1m, including the Finalto financial trading division sold to Gopher, this left an overall profit for the year of €674.6m, compared to a €297.4m loss in 2020.
The firm ended 2021 with total assets of €3.65bn, up from €3.07bn at the end of 2020.
“Our full year results demonstrate the quality of Playtech’s technology and the momentum across the group,” said Playtech CEO Mor Weizer.
“Our strong performance is underpinned by our B2B business, in particular the tremendous growth we have seen in the Americas. We have made real progress in the execution of our US strategy, supported by new licences, new launches and new partnerships, and we continue to go from strength to strength in Latin America, buoyed by new strategic agreements across the region.
“In B2C, the story is similar, with Snaitech continuing to outperform the market, achieving the position of the number one brand across sports betting and retail in Italy.
“Over the year Playtech has also refocused the business, with the sale of Casual and Social Gaming in January and the disposal of Finalto due to complete later this year. The appointment of Brian Mattingley as chairman significantly strengthens our corporate governance, and our Sustainable Success strategy places ESG at the core of our business.”
After the collapse of a recommended 680p per share acquisition by Aristocrat earlier this year, Playtech said in its annual report that it is still in talks with Hong Kong-based TTB Partners over a possible takeover.
Last month, Playtech announced that CEO Weizer would be excluded from any M&A-related board discussions, after he explored participating in a potential bid from TTB, alongside former Playtech director and CEO Tom Hall, colloquially known as “Hong Kong Tom”.
Pinpointing potential headwinds, London-based investment bank Peel Hunt said: “Playtech has over 700 colleagues in Ukraine and supporting them and managing the related disruption to the business may have a material impact. We are also uncertain about the impact of possible UK regulatory change.”
It did say however that the supplier’s full-year results were “stuffed with good things” and came in much better than expected, adding: “Caution over the potential impact of the Ukraine conflict and UK regulation hold us back from upgrading forecasts, but we reiterate our 800p target price and Buy recommendation.”
Playtech’s board of directors has once again urged shareholders to vote in favour of Aristocrat’s 680p per share offer to acquire the company.
The board was forced to release a statement reiterating its position on 26 January after a Sky News article suggested it was looking to dismantle and sell off its separate divisions should the £2.7bn Aristocrat offer be voted down at a general meeting on 2 February.
“While Playtech has made significant strategic and operational progress and is in a strong position for the future, Aristocrat’s proposal provides an attractive opportunity for shareholders to accelerate the delivery of Playtech’s longer-term value,” said the supplier.
A favourable vote for Playtech is reportedly in jeopardy due to a group of Asian-based shareholders, accounting for roughly 25% of the firm’s shares, working in tandem and allegedly seeking to block the Aristocrat deal for reasons which have yet to be confirmed.
Playtech requires the backing of 75% of shareholders to vote the deal through but is lacking confidence due to a lack of engagement from shareholders over their voting intentions.
“The board continues to seek engagement with all of its shareholders regarding the Aristocrat offer,” said the London-listed supplier in a statement last week.
“However, a number of material investors have not to date engaged meaningfully about their views on the Aristocrat offer, including certain investors that have disclosed or taken material positions in the company following the announcement of the Aristocrat offer.
“The absence of customary levels of engagement means that the board is approaching the Court and General Meetings without a clear understanding of whether these shareholders are supportive of the Aristocrat offer.”
Should Aristocrat’s acquisition fall through, Playtech could be forced to pursue other options, including the sell-off of separate business segments, as first suggested by Sky.
Playtech’s Italian-facing B2C operation led by Snaitech is known to have its admirers and it could also look to offload its unregulated Asian business to facilitate a future sale.
The provider is also a 49% shareholder in Latam leader Caliente, which has been linked with a $2.5bn SPAC spin out on Nasdaq in the US.
Australian gambling technology provider Aristocrat is currently the only company in the running to acquire Playtech.
Hong Kong asset management firm Gopher Investments – which has already purchased Playtech’s financial trading division Finalto for $250m – pulled out of a takeover of the whole company in November 2021.
Eddie Jordan-led JKO Play was the next suitor to withdraw its interest in Playtech amid a rumoured 750p per share offer, citing concerns the deal would be blocked by the rebelling group of Asian shareholders.
Playtech shareholders have sanctioned the sale of its financial trading division Finalto, fulfilling one of the key conditions of Aristocrat’s proposed £2.7bn takeover of the London-listed supplier.
Now the sale of the Finalto has been approved, the business will be transferred to Hong Kong-based Playtech shareholder Gopher Investments in a deal worth $250m.
Gopher last month made a preliminary approach to access due diligence information on Playtech, with a view to making an offer to acquire the whole business.
That announcement was made despite Playtech having already agreed terms with Aristocrat, with Gopher’s separate acquisition of Finalto already well underway.
It was eventually announced that Gopher would not make an offer for the whole Playtech business.
The completed disposal of Finalto was one of the key terms under which Aristocrat made its 680p per share offer for Playtech.
Providing an update to investors, Aristocrat said it was continuing to work with Playtech to complete the recommended acquisition, with the process of seeking the required anti-trust, foreign investment, financial, regulatory and gaming approvals progressing well.
The business still expects to complete the recommended acquisition as planned in the second quarter of next year, it said.
“The approval given by Playtech shareholders to dispose of Finalto meets a condition of Aristocrat’s recommended offer and is a further step forward in the completion process,” said Aristocrat’s CEO and MD Trevor Croker.
“Aristocrat’s offer for Playtech has been recommended by the Playtech board and is the only offer on the table for shareholders.
“We believe that Aristocrat’s offer provides an attractive value and enhanced regulatory and financial certainty for Playtech shareholders, while the combined group will also provide greater opportunities for Playtech employees in a leading global organisation.”
A Playtech shareholder meeting to approve the recommended acquisition has been convened for 12 January, 2022.
Reports suggest that Hong Kong-based Gopher Investments, a minority stakeholder in Playtech, is working on an offer to acquire the business, despite Playtech having already agreed terms on a £2.7bn bid from Aristocrat last month.
Gopher – which is already in the process of acquiring Playtech’s Finalto finance division in a deal worth $250m – holds a stake of almost 5% in the whole business, making it Playtech’s second-biggest shareholder.
It has been revealed that the investor made a preliminary approach to Playtech on 21 October, seeking access to due diligence information with a view to making an offer.
According to Sky News, which released the story on Sunday 7 November, sources said that Gopher’s deliberations were not guaranteed to lead to a formal offer, but that it was looking seriously at the option.
The investor is expected to issue a statement today confirming its interest in bidding for the whole Playtech business.
Playtech’s share price jumped from £7.06 to £7.35 this morning following the announcement, having already rallied from £4.29 to £6.79 in October following the announcement of Aristocrat’s £2.7bn bid for the business.
Aristocrat’s offer valued the business at £6.80 per share – but a series of irrevocable undertakings from Playtech shareholders would be allowed to lapse in the face of any rival bidder offering a price at least 10% higher.
This suggests Gopher would need to bid at least £7.48 per share in order to secure a board recommendation.
The Aristocrat deal is also dependent upon the Finalto sale to Gopher being completed.
It is not yet clear how Gopher would structure an offer for the whole Playtech business, considering it has yet to complete its purchase of Finalto, which was originally expected to be completed in the first half of 2022.
In a statement released today, Aristocrat said: “Aristocrat’s long-term engagement with regulators across key gaming jurisdictions, together with strong financial fundamentals, deep customer relationships and established presence in global gaming markets, positions Aristocrat to complete the transaction as planned in the second quarter of calendar year 2022.”
“Aristocrat believes that this will provide certain value to Playtech shareholders, while the combined group will also provide greater opportunities to Playtech employees.”
It went on to say the UK Takeover Panel will soon announce the deadline by which Gopher must clarify its intentions in relation to Playtech, according to the UK Takeover Code, and that once Playtech has published the Scheme Document relating to Aristocrat’s acquisition of the business, it “urges” shareholders to vote in favour of the deal.