Online gaming tech and financial brokerage firm Playtech plc (LON:PTEC) has announced that it has agreed to be acquired by Australia based gaming giant Aristocrat Leisure Ltd (ASX:ALL) for £2.1 billion (USD $2.9 billion), in cash.

The price of 680 pence per Playtech share being offered by Aristocrat – which has been agreed to by Playtech’s board – represents a 58% premium to Playtech’s closing price of 429.2 pence on Friday.

Playtech’s aggressive move to divest its Financials division – Finalto and Markets.com – makes a lot more sense now in the light of the Aristocrat deal. Playtech had seemingly been receiving and entertaining offers for the entire company by larger gaming firms such as Aristocrat, but none of the potential suitors were interested in its (non-core) FX and CFD businesses, even though those businesses were performing quite well lately alongside much of the CFD brokerage industry.

And as for Finalto and Markets.com, Playtech said that the buyers have agreed to to vote in favor of the pending sale, which is now expected to close in the second quarter of 2022.

The full announcement made on the matter by Playtech follows:

RECOMMENDED CASH ACQUISITION

of

Playtech plc (“Playtech”)

by

Aristocrat (UK) Holdings Limited (“Bidco”)

a wholly owned subsidiary of

Aristocrat Leisure Limited (“Aristocrat”)

to be effected by means of a scheme of arrangement under Part X of the Isle of Man Companies Act 2006

Summary

The boards of Aristocrat, Bidco (a wholly owned subsidiary of Aristocrat) and Playtech are pleased to announce that they have reached agreement on the terms of a recommended cash acquisition pursuant to which Bidco shall acquire the entire issued and to be issued ordinary share capital of Playtech (the “Acquisition”). The Acquisition is to be effected by means of the Scheme of Arrangement under Part X of the Companies Act.

Under the terms of the Acquisition, which shall be subject to the Conditions and further terms set out in Appendix I to this announcement and to be set out in the Scheme Document, Playtech Shareholders shall be entitled to receive:

for each Playtech Share 680 pence in cash representing a premium of approximately:

·             58.4 per cent. to the Closing Price per Playtech Share of 429.2 pence on 15 October 2021 (being the latest practicable date prior to publication of this announcement (the “Last Practicable Date”));

·             66.0 per cent. to the volume weighted average Closing Price per Playtech Share of 409.7 pence over the three-month period ending on the Last Practicable Date; and

·             55.0 per cent. to the volume weighted average Closing Price per Playtech Share of 438.8 pence over the 12 month period ending on the Last Practicable Date.

The Acquisition values the entire issued ordinary share capital of Playtech at approximately £2.1 billion on a fully diluted basis and values Playtech at approximately £2.7 billion on an enterprise value basis.

If on or prior to the Effective Date any dividend, distribution or other return of value is declared, made or paid or becomes payable by Playtech, the Acquisition Price shall be reduced accordingly. In such circumstances, Playtech Shareholders would be entitled to retain any such dividend, distribution or other return of value declared, made or paid.

Transaction overview

·           All-cash acquisition of Playtech by Aristocrat, intended to be recommended unanimously by the board of Playtech.

·           Playtech is one of the leading online gambling software suppliers with proven expertise in developing software platforms and content for online, mobile and land-based gambling.

·           Aristocrat is a leading global supplier of premium gaming content and technology, and one of the world’s top publishers of digital games. Aristocrat’s acquisition of Playtech is consistent with its growth strategy and will create one of the largest business-to-business (“B2B”) platform providers in the global gaming industry.

·           Playtech’s Real Money Gaming (“RMG”) experience and proven platform capabilities with Aristocrat’s leading world-class land-based and social gaming content brings together two complementary leading gaming content and technology providers.

Aristocrat believes that a combination with Playtech will:

·             provide Aristocrat with material scale in the already large and growing iGaming and online sports betting segment, collectively referred to as “online RMG”. This represents an estimated total addressable market of approximately US$70 billion (2020) globally. Online RMG offers new and complementary growth channels for Aristocrat’s land-based gaming business and content;

·             deliver medium-term revenue and earnings growth, in particular in the fast-growing North America online RMG segment, combining Aristocrat’s industry leading gaming content, long-term customer and regulatory relationships with Playtech’s technology and platform;

·             on a combined basis, allow Aristocrat’s and Playtech’s distribution, technology and content to meet a broader range of customer and player needs and deliver new and connected experiences, unlocking additional value across Aristocrat’s portfolio and deepening customer engagement;

·             through Playtech’s Snaitech business, a leading Italy-based omni-channel gambling operator, enable Aristocrat to operate and innovate in multiple European markets, across the entire value chain and free of channel conflict; and

·             deliver attractive financial returns, expected to be low to mid single digit EPSA accretive (pre-synergies) and mid to high single digit EPSA accretive (post-synergies) in Aristocrat’s first full year of ownership of Playtech.

Playtech recommendation

The Playtech Directors, who have been so advised by Wells Fargo Securities as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing its advice to the Playtech Directors, Wells Fargo Securities has taken into account the commercial assessments of the Playtech Directors. Wells Fargo Securities is providing independent financial advice to the Playtech Directors for the purposes of Rule 3 of the Takeover Code.

Accordingly, the Playtech Directors intend to recommend unanimously that Playtech Shareholders vote in favour of the Scheme at the Court Meeting and in favour of the Playtech Resolutions to be proposed at the General Meeting as the Playtech Directors have irrevocably undertaken to do in respect of their own beneficial holdings of 421,925 Playtech Shares representing, in aggregate, approximately 0.14 per cent. of the ordinary share capital of Playtech in issue on the Last Practicable Date.

Irrevocable undertaking and letters of intent

Aristocrat and Bidco have also received an irrevocable undertaking to vote in favour of the Scheme at the Court Meeting and in favour of: (i) the Playtech Resolutions to be proposed at the General Meeting; and (ii) the Finalto Sale Resolution at the general meeting at which the Finalto Sale Resolution is proposed for approval from T. Rowe Price International Ltd in respect of a total of 6,475,070 Playtech Shares representing, in aggregate, approximately 2.11 per cent. of Playtech’s issued ordinary share capital in issue on the Last Practicable Date.

In addition, Aristocrat and Bidco have received letters of intent to vote in favour of the Scheme at the Court Meeting and in favour of: (i) the Playtech Resolutions to be proposed at the General Meeting; and (ii) the Finalto Sale Resolution at the general meeting at which the Finalto Sale Resolution is proposed for approval from Boussard & Gavaudan Asset Management, LP, Boussard & Gavaudan Investment Management LLP, Schroder Investment Management Limited, Setanta Asset Management, SpringOwl Asset Management LLP and Ader Investment Management LLP in respect of a total of 56,515,088 Playtech Shares, representing in aggregate approximately 18.45 per cent. of Playtech’s issued ordinary share capital in issue on the Last Practicable Date.

Aristocrat and Bidco have therefore received irrevocable undertakings or letters of intent in respect of a total of 63,412,083 Playtech Shares representing, in aggregate, approximately 20.70 per cent. of Playtech’s issued ordinary share capital in issue on the Last Practicable Date.

Further details of the irrevocable undertaking (and the circumstances in which it shall cease to be binding or otherwise fall away) and letters of intent are set out in Appendix III to this announcement.

Information on Playtech

Playtech is a leading technology provider that develops platforms and content for the global gambling industry. It is considered one of the world’s largest online gambling software suppliers, offering innovative, value-added solutions to the industry’s leading operators.

Since Playtech’s inception in 1999, it has demonstrated a consistent and strong customer-centric culture based around innovation and the continual development of market-leading gambling products and content.

Information on Aristocrat

Aristocrat is a leading global gaming content and technology company and top-tier mobile games publisher, with more than 6,500 employees located in over 20 locations around the world. Aristocrat offers a diverse range of products and services including electronic gaming machines, casino management systems and free-to-play mobile games. Aristocrat’s regulated gaming products are approved for use in more than 300 licensed jurisdictions and are available in more than 80 countries.

Aristocrat is listed on the Australian Securities Exchange (“ASX”) with a market capitalisation of approximately AU$29.2 billion (approximately £15.8 billion) and is ranked in the top 20 ASX listed companies by market capitalisation.

Bidco is a wholly owned subsidiary of Aristocrat incorporated in England and Wales for the purpose of carrying out the Acquisition.

Timetable and Conditions

The Acquisition is conditional on, amongst other things, the approval of Playtech Shareholders and shall be put to Playtech Shareholders at the Court Meeting and at the General Meeting. In order to become effective, the Scheme must be approved by a majority in number of the Playtech Shareholders voting at the Court Meeting, either in person or by proxy, representing at least 75 per cent. in value of the Playtech Shares voted. In addition, the Playtech Resolutions must be passed by the requisite majority or majorities at the General Meeting. The Scheme will also need to be sanctioned by the Court.

The Acquisition is subject to the Conditions and further terms set out in Appendix I to this announcement, including the receipt of the relevant clearances from certain anti-trust, foreign investment, gaming regulatory and financial regulatory authorities, and the approval of the disposal of Finalto by Playtech Shareholders. It is expected that the Scheme will become effective in the second quarter of 2022 following satisfaction (or waiver, where applicable) of these Conditions.

Aristocrat will work with Playtech to engage constructively with all relevant stakeholders to satisfy these conditions.

The Scheme Document, containing further information about the Acquisition and notices of the Court Meeting and the General Meeting, together with the forms of proxy, shall be published as soon as practicable and, in any event, within 28 days of this announcement. The Court Meeting and the General Meeting are expected to be held as soon as reasonably practicable following the publication of the Scheme Document.

Commenting on the Acquisition, Brian Mattingley, Chairman of Playtech, said:

“In recent years, Playtech has successfully repositioned its world leading gambling technology and operations, expanding in strategically important regulated markets and driving major online B2B revenue growth. Whilst the business has made significant progress, most notably in the Americas, Aristocrat’s proposal provides an attractive opportunity for shareholders to accelerate Playtech’s longer-term value.”

Commenting on the Acquisition, Mor Weizer, CEO of Playtech, said:

“This transaction marks an exciting opportunity in the next stage of growth for Playtech, and delivers significant benefits to our stakeholders, including our customers, our shareholders and our incredibly talented people. This deal has the potential to enhance our distribution, our capacity to build new and deeper relationships with partners, and bolsters our technological capabilities. The combination of our two companies builds one of the largest B2B gaming platforms in the world, with the people, infrastructure and expertise to provide our customers with a truly best-in-class offer across all areas of gaming and sports betting.”

Commenting on the Acquisition, Trevor Croker, Chief Executive Officer of Aristocrat, said:

“The proposed combination would bring together Aristocrat’s world-class gaming content, customer and regulatory relationships with Playtech’s industry-leading global online RMG platform (B2B) and European B2C footprint.

The Combined Group would offer a broad portfolio of end-to-end solutions for gaming customers around the world, as well as seamless player experiences, underpinned by a shared focus on responsible gameplay and innovation.

Additionally, the business will be ideally positioned to unlock sustainable shareholder value by seizing opportunities in the fast-growing global online RMG segment as they continue to open up, particularly in North America.

The recommended offer is a full and fair value and reflects the strategic potential of the combination in a global gaming sector that continues to migrate online, as a result of technology and entrenched consumer-driven change.

Adding Playtech’s talented team with Aristocrat’s established strengths and momentum will create a true industry leader in the global online RMG space, particularly in terms of our B2B capabilities.

The proposed acquisition continues Aristocrat’s approach of investing in medium to long-term growth and we are extremely excited by the opportunities that this will bring for our shareholders, people, customers and players.”