Playtech sold but future unconfirmed
Gambling and financial trading firm Playtech became a must-see property in November 2021 after a trio of rival companies battled for the different sides of the interactive entertainment provider. While the loot ultimately went to Aristocrat Leisure on contender contenders JKO Play and Gopher Investments from China, the acquisition is not as clear as it initially appears. Either way, Playtech, an FTSE 250 company, will change hands in the second quarter of 2022.
Playtech has been involved in a wide range of interactive software since its inception in Estonia at the turn of the new century. Online, it is perhaps best known for its games of chance, which include slots, live casino experiences, simulated sports, bingo, and poker. But Playtech also has a substantial fintech presence, including trading and liquidity services, as well as marketing.
It would be misleading to describe Playtech as a developer in its purest form. The casino arm of the company is actually a conglomerate of studios, including Quickspin, Rare Stone, Origins, Eyecon and Vikings, which provide out-of-the-box (or “turnkey”) solutions to major gaming sites. These include 888 Holdings PLC, the entity behind the casino and poker software of the same name, among others.
The deal for Playtech is unlikely to make a difference to people who use the company’s software, but the acquisition process to date has been an interesting read. The buyout was initially finalized in mid-October, with Aristocrat, another slots developer, this time from Australia, offering Â£ 3 billion (US $ 3.7 billion) for Playtech. That figure represented Â£ 6.80 per share.
As the acquisition required the approval of three quarters of the shareholders, however, there was always a risk of blockage. This is when minority owner Gopher Investments becomes important. Gopher and Playtech already have a rich history, which includes the sale of the latter’s financial services property, Finalto, to Gopher. Several days after Aristocrat agreed to terms with Playtech, Gopher submitted his own offer.
Inevitably, Playtech would have been a valuable asset to Gopher due to its existing deals with – as mentioned – companies like 888casino. 888 is one of the largest casino properties in the US market and currently ranks fifth among the best online casinos in the US, among names like BetMGM and Caesars Casino. The site is particularly notable for the 30x welcome bonus it offers to new players.
Unfortunately, for Gopher Investments, at least, Playtech’s board recommended the company go with Aristocrat, which also meant that JKO Play, another potential buyer, was also being left out. JKO Play (or JKO Capital) is the brainchild of former F1 chief Eddie Jordan, who formed the company in 2021 specifically to invest in entertainment companies like Playtech.
Finalto and Barenboim
It is worth explaining the sale of Finalto to Gopher, which was approved at the same time as Aristocrat’s deal for Playtech. Playtech has been trying to get rid of Finalto for some time now, with reports suggesting that its desire to get rid of the fintech company dates back to early 2021. However, Gopher has faced an uphill struggle to buy it. against the investment firm Barenboim Group of Israel.
The Barenboim Group had practically claimed Finalto for itself until May, when Gopher succeeded in blocking a critical shareholder meeting with a $ 250 million cash offer for the trading company. Oddly enough, Gopher nearly derailed his own offer by not answering questions about his ownership and operations in China. The latter could have caused regulatory problems for Finalto.
Gopher’s saving grace took the form of shareholders’ rejection of the Barenboim group. This effectively meant that Gopher had no opposition to his stake in Finalto, and despite Playtech’s own disapproval, the investment firm continued to acquire Finalto. Gopher, who also owns interests in real estate, is part of the Noah group of fintech companies.
So what now? With the sale of Playtech to Aristocrat nearing completion, there will obviously be questions about how the business might change in the future. The game developer has long enjoyed the affection of investors due to its cheap stock price and excellent growth record, with profits rising nearly 4,000% in the past twelve months and revenues which should increase by 9.86% year on year.
However, in November, commentators expressed concerns about a possible massive drop in profits over the next three years, which could mean that interest payments are not covered by income. A fluctuating share price (while Playtech was selling for Â£ 6.80, its shares were trading at Â£ 7.26 in early November) also means it could represent a risky investment in the short term with little potential return.
The Playtech share price rose significantly from Â£ 4.20 on October 13 to Â£ 6.79 five days later. The company is currently riding a share price at its highest for the year, after peaking at Â£ 5.11 in March. Unfortunately, for investors, diversifying into a non-Playtech stock may be a much smarter option than sticking with it, given the potential issues mentioned earlier.
Playtech’s fortunes are inextricably linked to the growth of the US economy, which depends on regulatory and political changes. If the company is optimistic about its performance in the United States lately, showing growth of 103% in the Americans in the first half of 2021, it is nevertheless counting on an unconfirmed reality. Playtech has at least been proactive in forcing the change, however.
One of the largest US-based casinos, BetMGM, recently signed an agreement with Playtech to supply its games. A stroke, no doubt, but which still highlights the problems associated with working with casinos in the United States and, consequently, the concerns encountered by Playtech. BetMGM is only licensed to operate in certain states, including New Jersey and Philadelphia. This scenario applies to every gaming organization that wishes to operate in the United States.
Aristocrat Leisure nonetheless bought a business at its peak, although the next three years will be critical to ensuring Playtech’s long-term profitability.
This article does not necessarily reflect the views of the editors or management of EconoTimes.