Playtech will not go ahead with its plan to publicly list Caliplay, the company’s joint venture with Mexico-based operator Caliente Interactive, due to the rising cost of capital.
The deal is the latest victim of a worsening capital market environment that has already caused Hong Kong-based TTB Partner to pull out of the planned acquisition of the UK gambling software supplier earlier in July.
Playtech owns a 39% stake in Caliplay and had explored a transaction which would have seen the business acquired by a US-listed special purpose acquisition company (SPAC) – Tekkorp Digital Acquisition Corp – in order to penetrate the US market and target Latin American clients in the US.
However on Friday (29 July), Playtech said it would no longer pursue the deal in the envisioned format.
“Market conditions have deteriorated significantly since the transaction was initially contemplated and, accordingly, this transaction is no longer being pursued in the same manner,” the company said.
The London-listed supplier said it is now looking into plan B and continues to explore alternative opportunities with Caliplay, to build a standalone US business under the Caliente brand focused on the Hispanic community in the US.
Both Playtech and Caliplay are still in discussions with the SPAC about this alternative opportunity, but talks are at an early stage.
Playtech: “Market conditions have deteriorated significantly since the transaction was initially contemplated and, accordingly, this transaction is no longer being pursued in the same manner.”
Investors are closely watching developments at Playtech after the TTB acquisition fiasco, which was followed by a report that Eddie Jordan’s JKO Play might renew its interest in purchasing Playtech.
Despite its acquisition troubles, Playtech said “it is trading ahead of expectations” highlighting its robust B2B performance which was partially “driven by very strong momentum from the Americas including Caliente and other structured agreements in addition to a strong performance across the wider B2B operations”.
Meanwhile, Playtech’s consumer-facing business Snaitech has seen “excellent results driven by its online business, retail recovery and favourable sports results”.
The company’s board said that “this momentum across the business” gives it “great confidence” in the prospects for FY 2022 and beyond.
Former Formula One team boss Eddie Jordan could re-enter the race to buy Playtech, The Times reported yesterday (17 July).
In January, his company JKO Play pulled out of a potential 750p per share offer for Playtech, leaving Australian gambling technology provider Aristocrat Leisure and Hong Kong-based investment and advisory firm TTB Partners as the only two contenders to acquire the London-listed supplier.
Aristocrat’s offer was rejected by shareholders in February, while last week, TTB Partners decided not to follow through on its takeover bid, citing “challenging underlying market conditions” as the main reason.
Playtech’s shares fell more than 20% on the announcement after investors had been banking on a sale.
According to sources at The Times, JKO Play may now renew its interest in purchasing Playtech, although the firm declined to comment on the information.
Jordan co-owns JKO Play with former Scientific Games and OpenBet executive and sports betting sector veteran Keith O’Loughlin.
The company first expressed interest in a bid in November 2021 and was subsequently backed by Centerbridge Partners.
JKO also reportedly received financial support from Vikrant Bhargava, the Indian-born British businessman behind PartyGaming.
Despite the flurry of sale setbacks, Playtech CEO Mor Weizer expressed confidence in the company’s growth prospects last week, where it reported a 61% uptick in H1 EBITDA for 2022.
“Playtech carries strong momentum going into H2 2022 and continues to perform very well across its core B2B and B2C businesses,” he said.
“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,” he added.
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.
JKO Play has pulled out of a bid to buy Playtech, which would appear to make Australian gambling technology provider Aristocrat favourite to acquire the London-listed supplier.
According to the Financial Times, JKO Play – which is headed up by former F1 driver and team boss Eddie Jordan – pulled out of a potential 750p per share offer for Playtech over concerns a group of Asian investors would block the deal.
Aristocrat’s bid of 680p per share (£2.7bn), submitted at the start of December, had already been unanimously recommended for shareholders to accept by the Playtech board.
Interest from JKO saw the UK Takeover Panel extend the deadline for JKO to make a concrete offer for Playtech to 26 January, although it withdrew that interest as of today (21 January).
Playtech acknowledged the withdrawal and is still recommending that shareholders accept the Aristocrat bid in a general meeting on 2 February.
This is despite the fact the offer is below Playtech’s current share price, which has climbed nearly 72% since Aristocrat’s bid was accepted by the board last October due to the competing interest of JKO and Hong Kong-based Gopher Investments, which pulled out of the process in November.
In response to JKO’s retreat, Playtech has urged shareholders to engage with the Aristocrat offer. “The board continues to seek engagement with all of its shareholders regarding the Aristocrat offer,” it said in a statement.
“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.”
JKO is banned from making a new offer for Playtech for the next six months, according to the City Code on Takeovers and Mergers.
Interestingly, the FT reports that JKO intended to sell Playtech’s Italian-facing B2C operation Snaitech to Entain if it was successful in any deal.
Entain, which is already live in Italy via bwin, Eurobet and Gioco Digitale, could be looking to boost market share in the country after rival Flutter acquired Sisal for €1.9bn in December.
London-based investment bank Peel Hunt retained its Hold rating and 680p target price in wake of the news, adding: “The bid process has triggered an intense focus on Playtech’s value and it is clear that there is value to be extracted from Playtech’s interest in Caliente in Mexico and, we believe, from the Italian B2C business.”
JKO Play has been granted an extension to meet the put-up-or-shut-up deadline and make a clear intention regarding its possible acquisition of Playtech.
Previously, the deadline by which JKO was required to make a firm offer to acquire the business, or declare that it did not intend to make an offer, was set for today (5 January).
JKO must decide whether to go head-to-head with Australian gambling tech giant Aristocrat Leisure, which had its 680p per share offer for Playtech recommended by the supplier’s board on 18 October.
Playtech has now adjourned the shareholder meeting to approve the Aristocrat offer, which was originally scheduled for 12 January, to the 2 February, as it awaits a solid counter offer from JKO.
UK Takeover Panel rules state that JKO will now have until 26 January, seven days prior to the scheduled shareholder meetings, to make its intentions crystal clear.
JKO, which is led by Formula 1 team owner Eddie Jordan and Keith O’Loughlin, former SVP of sportsbook and platform for SG Digital, suggested it might make an offer for Playtech in November, when it approached the business to request access to certain due diligence information in order to assess acquisition terms.
The newly-formed business began exploring the possibility of a deal for Playtech despite the London-listed supplier having already agreed to the terms of Aristocrat’s £2.7bn bid.
In a statement released today, Aristocrat reaffirmed its intention to acquire Playtech despite the delay. It said: “The recommended acquisition provides attractive value in cash and enhanced regulatory and financial certainty for Playtech shareholders.
Acknowledging a potential rival bid from JKO, it continued: “Aristocrat further notes that any other potential bidders have already had a substantial amount of time to make an alternative proposal for Playtech. The decision to further delay the relevant shareholder meetings extends the period of uncertainty for all Playtech stakeholders.”
The shareholder meeting delay could potentially see changes to the terms of Aristocrat’s offer, including an increase in price.
At the time of writing, Playtech’s share price is ahead of the 680p per share offered by Aristocrat. It sits at around 727p per share, although it was initially buoyed by the original Aristocrat offer.
Sky News reported in December that Jordan-led JKO was preparing an offer of around 750p per share, which the Playtech board would have to seriously consider.
Shareholders will be hoping for further clarity over the future of Playtech’s Latam-facing subsidiary Caliente before the JKO offer deadline expires.
According to Sky, Caliente Interactive, an online gambling business predominantly operating in Mexico, is in advanced talks over a near $2.5bn merger with New York-listed SPAC Tekkorp Digital.
The SPAC deal is significant because Playtech owns 49% of Caliente Interactive through a joint venture.
Peel Hunt analyst Ivor Jones said: “Playtech shareholders will want to see the potential value of its stake in Caliplay reflected in any offer price.
“This could be achieved by the offeror (JKO, Aristocrat or another) including a contingent value right in the structure as was suggested in the Sky News article.
“If JKO has demonstrated sufficient seriousness of intent to justify delaying the shareholder meetings, we believe that the probability of an offer at higher than 680p per share has increased,” he added.
Playtech has revealed that Gopher Investments, the 4.97% shareholder in the supplier that was said to be working on an offer to acquire the whole business earlier this month, will not make an offer for the company.
Gopher already held an agreement with Playtech to acquire its Finalto finance division, and the announcement that it will not make a bid for the entire business does not affect the existing agreement, to which Gopher remains fully committed.
The Finalto acquisition is underway and expected to complete in H1 2022, in accordance with the rules of the Takeover Code.
However, Gopher reserves the right to set rules from the Takeover Code aside in certain circumstances.
Gopher may withdraw its offer in the event that the £2.7bn acquisition offer announced by Aristocrat lapses or is withdrawn, if a third party announces a firm intention to make an offer for Playtech, if Playtech announces a ‘whitewash’ proposal or a reverse takeover, or if there has been a material change of circumstances as determined by the Takeover Panel.
A firm intention to make an offer for Playtech may be forthcoming from JKO Play, a company controlled by former motorsport team owner Eddie Jordan, and gaming industry veteran Keith O’Loughlin.
Playtech announced yesterday that the firm had approached it to request access to certain due diligence information, in order to explore terms on which an acquisition offer might be made.
The preliminary approach indicated that JKO was in discussions with Centerbridge Partners LP, among others, regarding the possibility of it providing institutional debt and structured capital funding.
JKO has been provided with access to due diligence information for this purpose, however Playtech said the discussions are at an early stage and ongoing.
“There can be no certainty that JKO’s approach will result in an offer for the Company, nor as to the terms on which any offer might be made,” Playtech said.
Meanwhile, Aristocrat’s original bid for the business has been endorsed by Playtech’s board, and Aristocrat remains committed to completing the acquisition.
The UK Takeover Panel will soon announce the deadline by which any potential bidders must clarify their intentions in relation to Playtech.