Five things we learned from Intertain's strategic review

Intertain surprised the egaming world yesterday with the appointment of two industry heavy hitters into chairman and CEO roles, and the announcement it was planning a relocation to the UK, while also considering a sale of the business.

To shed some light on the company’s future, here are five things we learned from yesterday’s announcements and subsequent analyst call.

1) The sale of the business to a third-party and the relocation to London are not mutually exclusive

Although the appointment of London-based Neil Goulden and Andrew McIver suggests a lean towards a relocation rather than a sale, David Danziger, member of the Special Committee and former chairman of Intertain, told investors it was wrong to assume that. He said the firm was exploring both avenues fully and had received “significant interest” in a sale, including from at least one potential buyer in the UK.

He added that the two options were not mutually exclusive and could be pursued together.

2) Despite announcing McIver as CEO and Goulden as chairman of the board, their futures are still uncertain

Danziger told investors the new hires might only remain if the company relocates to London.

“If Intertain completes its London listing, Neal and Andy will assume their respective positions with Listco (the newly formed company),” Danziger said. “However, although Andy and Neal have joined at an exciting time, they both understand the uncertainty that comes with that and if we proceed with a third-party sale or otherwise decide not to go ahead with the London listing, no significant severance will be payable to either of them.”

The employee changes don’t end there, as the firm is also actively searching for a new CFO in light of Keith Laslop’s new role as president of Intertain Bahamas. The company added: “Intertain has met with a number of strong candidates and intends to appoint its new CFO as soon as practicable.”

3) Brexit will not affect the company or its plans for relocation

Danziger was quick to point out that Intertain was protected from the plummeting pound by a currency swap agreement it entered into last year, which locked in a GBP/USD exchange rate of 1.51 for the firm compared to the current rate of 1.34.

“The currency swap mitigates Intertain’s exposure to exchange rate fluctuations between the pound and the US dollar,” the firm said.

Elsewhere Laslop said the gaming industry and bingo in particular was largely recession-hardy, should the UK economy slump continue. He pointed out that Jackpotjoy’s revenues had not fallen since 2002, despite the major recession in 2008, adding: “With an average deposit of just ?16, our customers don’t care about the world economy, they care about enjoying their free time.”

4) The UK is Intertain’s “natural home”

Danziger said the UK was a “natural home for its listing”, particularly following its acquisition of the Jackpotjoy business from Gamesys. He said a London listing would provide Intertain with access to a large, liquid and international market, with an analyst and investor base with extensive sector knowledge. The UK is also home to a significant number of Intertain’s global gaming industry peers and a majority of its online gaming peers.

“Stakeholders have highlighted the potential of a greater exposure to European capital markets to help achieve a fuller and more appropriate valuation of Intertain’s businesses,” he added.

5) We won’t know the final decision until September

Intertain said its special committee would provide another update on the process before the end of July. From there, the board plans to propose its recommended alternative to shareholders for consideration and a vote at a shareholders meeting expected to be held in September 2016.

Investors were not overly impressed by the changes with shares dropping 2% yesterday to C$10.5.