Exclusive: Playtech finalizing Markets.com / Finalto sale for $200 million
FNG Exclusive… FNG has learned that online gaming tech company Playtech (LON:PTEC) has entered into the final stage of negotiations to sell its financials unit for $200 million.
The unit includes the Markets.com retail FX and CFDs brokerage, as well as the company’s FX B2B arm Finalto, which was recently rebranded from TradeTech Group. Finalto essentially comprises two businesses that Playtech acquired for a total of about $270 million four years ago, CFH Group and Alpha Capital Markets.
We had reported exclusively about the planned sale back in August, breaking the story that Playtech had engaged investment bank UBS to find a buyer for the Financials division as Playtech sought to focus on its core gaming activities. At the time, Playtech and UBS had already begun discussions with a number of potential buyers.
One of the buyer groups we had identified at the time, led by Israeli entrepreneur Zvika Barenboim, is apparently the group moving forward with the transaction, however in a somewhat reconstituted fashion. Israeli late stage tech venture fund Fortissimo is dropping out of the group, which will include Mr. Barenboim, Israel’s Bank Leumi, and two Israeli insurance companies Menora and Phoenix.
The Barenboim group has apparently been given a one month exclusivity period to conclude its diligence and finalize the deal, which would see the group pay $170 million up front for Markets.com and Finalto, with another $30 million contingent on future performance – for a total expected deal value of $200 million. That is at the low range of the initial August discussion we reported, not unexpected since Finalto had a challenging second half of 2020.
We also understand that a substantial amount of capital (or cash, rather) will be included with the sold companies as part of the deal, possibly in the range of $100 million, making the “real” value of the transaction closer to $100 million.
At this stage we understand that there is no guarantee that a deal will indeed be finalized, but it looks quite likely given the commitment of the Israeli financial institutions which will provide most of the capital for the transaction – although their commitment is largely guaranteed by the large amount of cash in the acquired company, as we note above. Zvika Barenboim’s group will be putting in just $20 million but getting control with about half of the acquired shares. Leumi and Menora will each acquire 20%, with each putting in about $50 million. The odd arrangement seems to indicate that Mr. Barenboim is also bringing to the deal his knowledge of running internet based companies, and will bear overall responsibility for running the acquired operations.
Finalto is now run by longtime Playtech executive Ron Hoffman, after most of the senior officers who arrived with CFH Group and Alpha Capital Markets (e.g. Christian Frahm, Søren Bjerregaard, Muhammad Rasoul) resigned over the past 12 months. Markets.com is run from Cyprus by CEO Joe Rundle.
We will continue to follow this story as it develops.
Gerald Segal
January 25, 2021 @ 4:50 pm
Playtech has now put out a statement on the matter. Full text follows:
25 January 2021
Playtech plc (‘Playtech’ or the ‘Company’)
Statement in response to press speculation
Playtech notes the recent speculation in the Israeli media and confirms it is in exclusive discussions regarding the possible sale of its Financials division (Finalto) to a management consortium backed by Barinboim Group, Leumi Partners Limited, The Phoenix Insurance Company Limited and Menora Mivtachim Insurance Limited (the “Consortium”). The cash offer from the Consortium is up to US$200 million, of which US$170 million is payable on completion. Approximately US$110 million of capital required to run the business will be transferred with the business upon any sale.
As Playtech has announced previously, including in its trading update on 12 January 2021, it is a strategic focus of the Company to simplify its business and dispose of non-core assets, and as such it has been continuing to evaluate all options for Finalto. Whilst discussions are progressing, there can be no certainty that any transaction will be forthcoming nor on what terms it would occur.
A further announcement will be made if and when appropriate.