Finalto bidding war hots up as Hong Kong fund adds $10m sweetener

Hong-Kong based private equity firm Gopher Investments has introduced a new $10m (£7.2m) ‘break fee’ sweetener into its $250m bid to acquire Playtech’s financial trading arm, Finalto. The fee is $1.8m more than the $8.8m termination fee Playtech would have to pay to the rival Barinboim Group backed bid if the London-headquartered supplier elected not to continue with the sale its board first approved in May. “The break fee is also subject to Playtech engaging properly with Gopher and acting reasonably and in good faith and would not be payable if Playtech subsequently enters into a transaction for Finalto with a third party,” Gopher Investments said in a statement. Gopher said the introduction of the break fee reflected Gopher’s “confidence” in its ability to complete the transaction on the terms outlined in its initial bid tabled earlier this month. The $250m all-cash offer made by the firm represents a premium of up to 47% on the current Barinboim offer. The introduction of the Gopher Investment bid has triggered a shareholder war, with Gopher using its 4.97% stake in the firm to lobby shareholders to withdraw their support from the Barinboim bid. Playtech proxy advisors ISS and Glass Lewis withdrew their support for the Barinboim proposal, with Glass Lewis suggesting the $8.8m fee was not “prohibitively large enough” to prevent Playtech from exploring the Gopher Investments offer. Playtech is already in advanced final-stage discussions with Barinboim Group and its partnering consortiums, with the initial offer set to be voted on by shareholders at a general meeting on 15 July. However, the pressure from Gopher on investors seems to have found its mark as Playtech issued an RNS confirming the adjournment of the general meeting until 29 July to “consider recent developments” and potentially the Gopher Investment bid. “As announced previously, both Playtech and the Consortium are bound by the restrictions agreed as part of the [binding agreement], which includes not engaging in negotiations with any third party regarding a potential transaction involving the sale of Finalto, as is customary for transactions of this nature,” Playtech said in a statement. “For the avoidance of doubt, the adjournment of the General Meeting does not change these restrictions. “The indicative proposal from Gopher is non-binding and is subject to a number of conditions, therefore there can be no certainty that the transaction proposed by Gopher would proceed to signing or completion. “As stated above, the Consortium Offer [the Barinboim bid] has been signed and is binding, but remains subject to shareholder and regulatory approval, and as such there can be no certainty that the Consortium Offer will proceed to completion,” the firm added. Responding to the revised proposal from Gopher Investments, Barinboim took aim at Gopher Investments conduct over its bid, citing a lack of information disclosure by its rival for Finalto. “Since Gopher announced its indicative non-binding interest on 2^nd July 2021, it has revealed very little information on itself, the source of its funds and its ultimate controlling parties, all of which will be heavily scrutinised by regulators,” Barinboim said. “To the best of the Consortium’s knowledge, Gopher has failed to properly answer even basic questions on these matters, which should be of great concern. “The Consortium hopes that Gopher will use the extension period to now be more forthcoming and provide sufficient information so Playtech and its shareholders can properly assess the ability of Gopher to pass the intense regulatory scrutiny it will be subject to, removing considerable uncertainty for shareholders. “Since Gopher’s announcement from 2^nd July 2021, Playtech’s share price has underperformed. “Should it be revealed by Gopher that any of its ultimate controlling parties are indeed linked to China, any acquisition is likely to raise material regulatory concerns and will be subject to even closer scrutiny,” Barinboim concluded.