Teddy Sagi, the controlling shareholder in gaming industry solutions developer Playtech Cyprus Ltd. (AIM:PTEC), has long known that acquisitions are the way to become a major player in a competitive industry like the online gaming industry. Acquisitions should also not necessarily be limited to other companies in the same field. Over the past five years, since he floated Playtech on London’s Alternative Investment Market (AIM), the company has made six acquisitions, most of which have paid off. Today, it announced the seventh, and largest.
Playtech is acquiring PT Turnkey Services Ltd. for an inital €140 million in cash from Worldwide Online Enterprises Ltd., and expects to close the deal by the end of June. Playtech states that Sagi owns PT Turnkey, making the acquisition a party at interest deal. It turns out that when it was floated, Playtech received a call option to affiliates (companies that market gaming sites of other companies) owned by Sagi.
Playtech will pay the initial €140 million in equal semiannual installments over 30 months. It could pay up to an additional €140 million in cash based on the target group's (PT Turnkey and its affiliates) performance in the three years following the completion of the integration process (due by the end of 2011) and if the target group's adjusted EBITDA for 2014 times seven exceeds the initial payment. The additional payment will be made in four equal installments over 18 months
The total payment could therefore reach ₤280 million.
Playtech will finance the acquisition from independent sources and future cash flows. The company had $96 million in cash at the end of 2010.
Playtech says that the companies incorporated in the target group had €90.2 million revenue in 2010 and an EBITDA of €18.9 million. The figure indicates that acquisition was made at a multiple of 8.4, similar to the multiple that Playtech put as a condition for the additional payment.
Playtech says that the companies in the target group will comprise four separate service divisions. The marketing division will manage the affiliates, the customer base, statistics, marketing, and advertising services. The operations division will provide round-the-clock support services to site operators. The payment advisory division will advise operators on financial payment and control consultancy services. The network management division will handle daily management of the Playtech iPoker poker network.
In other words, the target group will become a one-stop-shop through which Playtech will provide services to the online gaming industry.
Playtech says, "The acquisition will enable the group to be a single source supplier of online gaming solutions, particularly to the growing number of new entrants targeting regulated online markets."
PT Turnkey will have at least 850 employees mostly in Bulgaria and the Philippines
Sagi owns 40.4% of Playtech through Brickington Trading Ltd. Playtech's share price fell 4% in London today to ₤3.53, giving a market cap of ₤891 million.
Published by Globes [online], Israel business news - www.globes-online.com - on March 10, 2011
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