Playtech makes FX play with 458m acquisition
Software giant will pay Teddi Sagi trust-fund-owned Telesphere 208 upfront with a potential 250m in earn outs for brokerage firm TradeFX
Playtech has struck a conditional 458m (£333m) agreement to acquire a majority stake in foreign exchange and currency brokerage firm TradeFX, a company 86.45% owned by a trust of Playtech founder Teddi Sagi.
The software giant will pay an initial cash sum of 208m for a 91.1% stake in the firm with additional payments, which could total as much as 250m, to be paid based on future performance. The deal is expected to close next month.
TradeFX is currently 86.45% owned by Telesphere, a subsidiary of a trust for the benefit of Sagi, with the remaining equity owned principally by management of the TradeFX Group.
In 2014, TradeFX reported EBITDA of $34.9m (£23.5m) and for Q1 2015 EBITDA was $12.3m (£8.3m) and Cenkos Securities analyst Simon French said the deal would be “significantly earnings enhancing” adding approximately 25% to Playtech’s full-year EBITDA.
Playtech said TradeFX, which operates the Markets.com brand, represented a “compelling opportunity” to enter a new vertical while Playtech CEO Mor Weizer said the deal would provide the firm with “exciting growth opportunities”.
According to Peel Hunt analyst Nick Batram, a diversification away from Playtech’s core gaming business should not come as a surprise with a move into forex providing the firm with greater potential for growth.
“We believe the underlying global growth in CFDs and particularly binary options is greater than that of gaming,” Hunt said. “Management believe there is significant potential to increase the scale of the B2B business with TradeFX through its existing gaming customer base,” he added.
Weizer also suggested the acquisition of TradeFX wouldn’t be the last deal the firm would strike in the coming months with the CEO having previously stated Playtech would make a “next level” acquisition in H1.
“Following the acquisition, Playtech will retain significant resources to continue to pursue further acquisition opportunities,” Weizer said.
The purchase of TradeFX is the latest in a list of dealings between Playtech and Teddi Sagi-owned companies, which includes Playtech’s purchase of PT Turnkey Services for £125m in 2011.
“Whilst there may be some disappointment this is another related party transaction, Teddy Sagi has proved to be a good source of deal flow which have contributed strongly to Playtech’s success for the benefit of all shareholders,” French said.
TradeFX, founded in Cyprus in 2009, provides services to more than 100 countries in over 25 languages and employs more than 500 staff across five offices.