On Monday, Playtech Cyprus Ltd. (AIM:PTEC) announced a two-part deal that enables it to profit from one of Britain's strongest online gaming brands and also boosts the fortune of Playtech controlling shareholder Teddy Sagi. Playtech develops software for online gaming. The company fell 0.5% today to ₤4.25, giving a market cap of ₤1.01 billion. The share has risen 23% over the past year.
In the first stage, Playtech will acquire certain online gaming marketing assets, businesses, and contracts from affiliates and other third parties for a total consideration of up to $250 million (£144.5 million) in cash from existing resources. The company will immediately sell most of these assets to William Hill plc (LSE: WMH) in exchange for a 29% stake in William Hill Online. Playtech has an option to increase its stake to 32%, subject to certain conditions. William Hill will have a right to buy out Playtech's stake in William Hill Online after four and six years on an independent fair value basis.
Playtech added that the purchased assets reported a net profit of $10.4 million (£5.3 million) on $51.4 million (£26 million) in aggregate revenue in the first half of 2008. The assets' net profits are growing rapidly, and currently amount to an annualized $31 million (£17.9 million).
In the Internet industry, an affiliate is usually a company or an individual that markets the activity of another company in a variety of ways. In the online gaming industry, an affiliate is a company that sends players, found through online marketing, to gaming sites. The role is similar to that of Empire Online Ltd. (AIM: EOL) for PartyGaming plc (LSE: PRTY).
The interesting point is the identity of the owners of two of the purchased assets. Playtech states that Uniplay International Ltd. and Six Digits Trading Ltd. are two companies own by trusts whose sole beneficiary is Sagi, who owns 41.1% of Playtech. The sale of the two companies is therefore a parties at interest deal under AIM Rules 12 and 13. The other companies in the transaction have no affiliation with Sagi.
Playtech stated, "The directors of Playtech consider… that the terms of the acquisition are fair and reasonable insofar as Playtech’s independent shareholders are concerned."
Uniplay was spun off of Empire Online, controlled by Noam Lanir, for $11 million as part of the sale of assets to PartyGaming.
The buyer of Playtech's asset, William Hill, is the second largest online gaming brand in the UK, after Ladbrokes plc (LSE: LAD), which nearly acquired 888 Holding plc (LSE:888), the online gaming company controlled by brother Avi and Aharon Shaked. William Hill has a market cap of ₤609 million. The Playtech deal will strengthen William Hill's online gaming business, which it has not been able to develop until now.
Published by Globes [online], Israel business news - www.globes-online.com - on October 23, 2008
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