Shares in online gambling software supplier Playtech (PTEC) surged 55% to 667p on Monday after it said it had agreed terms to be acquired by Australian gaming company Aristocrat for 680p in cash.
The price represents a 58.4% premium on Friday’s closing price and a 60% premium to the volume weighted average price over the last three-months. The acquisition values Playtech at £2.1 billion on a fully-diluted basis and £2.7 billion including net debt.
The all cash acquisition was unanimously recommended by Playtech's board. Aristocrat is a leading global content and technology company listed on the Australian securities exchange with a market capitalisation of around £15.8 billion.
A STRONGER COMBINATION
Aristocrat said the combination of the two companies would provide it with ‘material’ scale in the global online betting, or iGaming as it is sometimes called, plus sports betting markets which have an addressable market value of around $70 billion.
The online distribution opportunities are expected to add ‘complimentary growth’ to Aristocrat’s land-based gaming business and content.
In addition, Aristocrat reckons the combination can deliver attractive financial returns adding low-to-mid single digit growth in earnings per share pre-synergies and mid-to-high single digit growth post synergies, in the first year.
EXPERT VIEWS
Investment director at AJ Bell Russ Mould commented: ‘It may not be popular with ESG investors but gambling is an area in which the London market clearly excels, reflected in the covetous glances UK-listed firms have attracted in recent months from overseas bidders.
‘The business had also become a little unfocused and untidy, however it has been in the process of streamlining its operations which, ironically, may only have made it a more attractive morsel for Aristocrat.’
Gambling consultant firm Regulus partners said it thought the deal was ‘strategically compelling’, but also highlighted the challenges ahead.
The firm said, ‘top down, the deal solves a lot of problems for both businesses, but the execution requirements are daunting to say the least, especially given Aristocrat’s almost complete lack of relevant experience.’
