Playtech Unveils Their Big PlansBy: Ryan Alders, Friday June 26th 2009
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In an interview with Mergermarket, Playtech's chief finance officer, Shuki Barak, outlined the big merger and acquisition plans that the leading listed online gaming provider has.
Top on the list was a deal that could be two to three times its William Hill deal. The William Hill deal cost Playtech about $250 million. This one is in the region of $500 to $750 million. The name of the target company has not been disclosed. But Playtech has a call option on the marketing company that expires in 2011. The proposal is being assessed under advice from Deutsche Bank and is likely to materialize in 2010. Barak said that though the William Hill deal was unique in financial structure it was not unique in terms of funds outlay. Barak told Mergermarket, "We can now afford half a billion acquisition using current credit facilities."
Barak also indicated that Playtech is looking at mergers and acquisitions in order to speed up growth. Immediately they are evaluating four smaller companies for acquisition. These include a hosting provider, a customer services specialist and a payment advisory firm. Playtech is also planning to enter into between 10 and 15 license agreements in 2009. Barak was equally clear as to what Playtech does not want to do. He said, "As a pure software supplier, we have no intention of going into operations, as it would create a conflict of interest."He therefore scotched rumors of Playtech bidding for the distressed Spanish gaming operator, Codere. Barak, however, added that Playtech would not be averse to a minority share in gaming operations, though there were no immediate plans of this.
Earlier the Deutsche Bank business analysts had indicated that Playtech is a good prospect for investors. They referred to Playtech as the "best play on medium term growth in the online gaming sector". They cited several reasons for this recommendation. The main one was its deal with William Hill Online. Playtech's 29% stake in William Hill would result in a not insubstantial share of the gaming operator's profits accruing to Playtech. Also Playtech's software would be showcased on one of the leading online gambling operations. Deutsche Bank also factored in the continued moves against online gambling in the United States, including the recent seizure of funds. This would results in benefits accruing to European and Asian markets and Playtech is a major player in both.
Playtech's financials are excellent. The revenues in 2008 exceeded €110 million with an operating margin of 65%. The market capitalization of its stock stands at over £1 billion. According to the Deutsche Bank analysts Playtech was ready to move from its Alternative Investment Market status to the main London market.
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