Breaking News: Playtech in social u-turn as Q1 revenues double
Proposed acquisition of Teddy Sagi's social assets switched to licensing agreement as supplier ramps up efforts to be accepted to the FTSE 250.
Playtech has altered its deal with majority shareholder Teddy Sagi to only license social assets in which he has a beneficial interest, just a week after announcing it would purchase a stake in them outright.
The MoU concerning Playtech’s social-focused deals for Sagi-owned Viaden and CTXM “ as exclusively revealed by eGaming Review last week “ will now be amended to take the form of a licensing agreement rather than an outright purchase as the software provider pushes for a listing on the main market of the London Stock Exchange.
Announcing its first quarter results this morning, it did not reveal the reasons behind the change, however eGR understands the swift u-turn on acquiring more of Sagi’s assets is due to transparency issues raised in part by several analysts when the social investments were announced on April 16.
At the time analyst Simon French of Panmure Gordon said the announcements would “reignite concerns over related party transactions”. French reiterated his concerns surrounding the company’s deals with Sagi and today retained his firm’s ‘Hold’ recommendation explaining “[F]lip-flopping around the terms of the social gaming investment underlines our concerns over related party transactions.”
Nick Batram, analyst with Peel Hunt, added: “No doubt the decision not to proceed with the acquisition of assets from Tedy Sagi will grab many of the headlines, and that is the dilemma when considering an investment in Playtech.”
This is not the first time Playtech has acquired some of Sagi’s assets for considerably more than he paid for them. On 10 March last year the company announced it would acquire Sagi’s PT Turnkey Services, the holding company for Europartners, one of the largest affiliate programmes in egaming, for an initial fee of 140m with the company completing the deal on July 1 and agreeing a discounted fee last month of just over 210m.
At the time chief executive Mor Weizer said the deal would give Playtech “direct contact with [operators’] players for the first time as well as “direct communication between the operators [its licensees] and their customers”.
PTTS achieved revenues of 90m in 2010 and, with more than 50,000 affiliates on its network, makes it one of the most powerful marketing, acquisition and retention businesses in egaming strengthening Playtech’s position as, in its own words, a “single source supplier of online gaming solutions” to new entrants targeting regulated and soon-to-be-regulated markets. At the time Weizer denied the deal would bring the business closer to becoming an operator.
In today’s results PTTS contributed 25.7m of the group’s 75.1m total revenues for the first quarter, while casino revenues rose 35% year-on-year to 34.5m. Elsewhere a strong performance from casino and the acquisition of PT Turnkey Services (PTTS) have jointly helped Playtech double its year-on-year revenues, the software provider has revealed in its trading update for the three months ended 31 March.
Playtech said its plans to move to the main market were “progressing”, and that it had signed a memorandum of understanding (MoU) to move into the London offices currently occupied by subsidiary Gaming Technology Solutions (GTS), by way of an acquisition or leasing agreement, another of Sagi’s assets he has sold to Playtech for an initial 10.8m.
Elsewhere a number of other product verticals have seen revenues rise year-on-year, the only exception being poker where the figure dropped 6% to 5.3m (compared to 5.7m for the corresponding period in 2011), while overall gross income rose 90% year-on-year to 88.4m.
The increased income figure follows a number of new acquisitions over the past year including Ash Gaming, Mobenga and Geneity, the latter acquired in January this year and described in a statement from Playtech as “Making good integration progress”.
Playtech’s preparations for the start of business from another January deal, the joint venture with German land-based operator and manufacturer Gauselmann, are said to be “well advanced” while Boylesports’ casino launched successfully on the Playtech platform during the quarter.
Despite his aforementioned reservations, Batram retained his firm’s ‘Buy’ recommendation, saying: “Our view remains that Playtech is a good business and strategically well placed and, for those prepared to accept the corporate backdrop, the shares represent good value.”