Playtech remains on M&A hunt after Plus500 deal
CEO Mor Weizer says contract negotiations and due diligence were completed in "little more than a week" after Playtech spotted an attractive opportunity
Playtech this morning caught the financial market off-guard when revealing it had agreed terms on a £459.6m purchase of financial trading company Plus500 with the two parties managing to thrash out a deal in “little more than a week”, according to Playtech chief executive Mor Weizer (pictured).
Playtech said it approached Plus500 after the online CFD trading firm announced on 19 May that it had frozen the accounts a large number of customers following an audit made by the UK Financial Conduct Authority (FCA) into its AML and KYC processes.
Both Weizer and CFO Ron Hoffman, who will head-up Playtech’s financial vertical following completion of the deal in September, this morning faced questions from analysts on whether the quick turnaround allowed sufficient time to vet the company.
“We boosted this transaction with every possible resource both internal and external to be in the position to support or not support this transaction and eventually we found this to be attractive for Playtech,” Hoffman said.
“Even though it’s only been a week, we have managed to go through all due diligence processes to ensure we are comfortable that this is the right transaction for us,” he added.
Weizer said the firm’s current management team would remain in place for the next 12 months to ensure a smooth transition to Playtech while it also had the resources to support Plus500’s current 100-strong team of employees.
The chief exec also said he was “excited” by the prospect of combining Plus500’s product and marketing capability with the CRM prowess of TradeFX, the financial trading firm it acquired earlier this year for £333m.
And although today’s deal will require Playtech to take on around £250m worth of debt, the firm remains acquisitive and continues to run the rule over companies in both the gaming and financial sectors, with the firm ready to exercise an option to buy an additional finance-focused firm ofr around £70m as part of its TradeFX deal.
“Even after the completion of this transaction, our core business will remain gaming and we are still very active and remain very acquisitive in identifying potential acquisition targets,” Weizer said.
Plus500 has been prevented from on-boarding any new customers until it has installed the correct procedures and audited all current customers acquired under its FCA licence, a process it expects to complete within the next month.
Due to the scrutiny, Plus500 has also been asked to open itself up to regulators from other jurisdictions while its share price has tumbled and its full-year financial performance is expected to be materially down on 2014 when revenues totalled approximately £150m.
According to Weizer, the problems were caused by Plus500 having insufficient infrastructure to cope with its rapid rate of growth and said Playtech’s early involvement, aided by the rapid completion of negotiations, would help to stem the bleeding as soon as possible.
Despite some questions over whether the 400p price per share would still prove to be attractive to both parties come September, Weizer was confident the deal would still progress and said it could only be scuppered by a “material adverse change affecting the business where the transaction becomes void” or an improved rival bid.