It appears as if Teddy Sagi’s Playtech PLC (LON:PTEC) is indeed making a play to become the world’s largest Retail Forex broker, although recent rumor mongering regarding their planned target seems to have been off base.
After bringing Markets.com and TopOption under its umbrella, Playtech has now agreed to buy recently-beleaguered but fast-growing Plus500 Ltd (LON:PLUS) for £4.00 per share in an all-cash deal, valuing Plus500 at £460 million (just over $700 million).
Both Playtech/Markets.com and Plus500 have similar backgrounds – based in Israel, regulated in Cyprus (although Plus500 is also regulated by the FCA in the UK, with which it is now dealing in resolving AML/KYC related issues), with their founders getting started first in online gaming – Playtech most obviously in online gambling technology, while Plus500’s founders made their first fortunes in online backgammon website Play65.
Will this help Plus500 resolve its issues with the FCA? And help solidify its relationships with affiliates, as other UK-centric brokers have begun to poach them. Or is Playtech inheriting a potentially volatile situation?
Another interesting angle to the story is UK money manger Odey Asset Management. Odey has been a long term shareholder in Plus500. But after Plus500’s recent share price plunge Odey started buying, upping its stake as of last week to above 20%. We’re not sure if they made money overall in their Plus500 investment, since the shares they’ve held long term have certainly dropped in value. But clearly they’ll be making a nice tidy profit on the shares they’ve picked up in the past week in the £2-3 range.
Some more deal details:
The boards of both companies have agreed on a recommended cash acquisition through which the entire issued ordinary share capital of Plus500 will be acquired by Playtech. Plus500 Shareholders will be entitled to receive 400 pence per Plus500 share in cash. The Acquisition values the entire issued ordinary share capital of Plus500 at about £459.6 million.
Expected closure of the deal
The parties currently anticipate that the deal will be finalized by the end of September 2015, subject to regulatory approval.
Strategic and financial rationale for the Acquisition
· The Acquisition represents a unique opportunity due to Plus500’s market reach, advanced technology, product offering and existing customer relationships globally, which allows it to successfully attract and convert customers.
· The combination of Plus500 with Playtech’s recently acquired TradeFX business will enable the combined business to maximise the market opportunity and product offering by utilising the strengths of both businesses.
· Playtech intends to provide Plus500 with CRM capabilities and expertise to maximise customer life time value and improve its standalone financial performance.
· Plus500’s management have executed undertakings that they will remain with the business for a period of 12 months from completion of the Acquisition to secure a smooth transition to Playtech management.
· The Acquisition is expected to be immediately earnings enhancing.
Recommendations and approvals
· The Plus500 Directors consider the financial terms of the Acquisition to be fair and reasonable. Accordingly, the Plus500 Directors intend to unanimously recommend that Plus500 Shareholders vote in favour of the Acquisition at a Plus500 General Meeting which will be convened in connection with the Acquisition. Alon Gonen, Gal Haber, Elad Ben Izhak, Shlomi Weizmann and Omer Elazari have undertaken to procure the vote in favour of the Acquisition in respect of their own beneficial holdings of 40,932,911 Plus500 Shares representing, in aggregate, approximately 35.6% of Plus500’s issued share capital on 29 May 2015, being the last Business Day before the date of this Announcement. Liberum Capital Limited (“Liberum”) has provided financial advice to the Plus500 Directors.
· In order to proceed with the transaction, the Acquisition requires the approval of Plus500’s Shareholders holding the majority of the Plus500 Shares at a General Meeting. Therefore, the Directors of Plus500 intend to send a circular in the form of an information statement (“Information Statement”) to Plus500’s Shareholders as soon as possible and within twelve days of this announcement, the purpose of which is to convene a General Meeting enabling Plus500 Shareholders to vote on the Acquisition.
· It is intended that the Acquisition will be effected by means of a merger of Socialdrive Limited (“Socialdrive”) a wholly owned subsidiary of Playtech into Plus500 in accordance with the provisions of Israeli Companies Law. The Acquisition is not governed by the City Code on Takeover and Mergers (“the UK Takeover Code”).
· The Acquisition will be put to the vote of Playtech Shareholders as a Class 1 transaction for Playtech for the purposes of the UK Listing Rules. The Playtech Directors consider the Acquisition to be in the best interests of Playtech and the Playtech Shareholders as a whole and intend to unanimously recommend that Playtech Shareholders vote in favour of the Acquisition at the Playtech General Meeting which will be convened in connection with the Acquisition.
· Brickington Trading Limited, being the largest Playtech Shareholder, has undertaken to vote in favour of the Acquisition in respect of its own beneficial holding of 98,645,782 shares in Playtech representing approximately 33.6 per cent. of the ordinary share capital of Playtech in issue on 29 May 2015 being the last Business Day before the date of this Announcement.
· The Playtech Directors have received financial advice from Canaccord Genuity Limited (“Canaccord Genuity”) in relation to the Acquisition. In providing their advice to the Playtech Directors, Canaccord Genuity has relied upon the Playtech Directors’ commercial assessment of the Acquisition.
Commenting on the Acquisition, Mor Weizer, Chief Executive Officer of Playtech said: “Having recently completed the acquisition of TradeFX, the opportunity to acquire Plus500 will prove transformational for our ambitions to expand Playtech’s wider offering. As an immediately earnings enhancing acquisition, the combination of the two businesses is compelling, enabling us to apply our market-leading products and services to the enlarged financial trading business as we continue to execute our growth strategy for the Group.”
Commenting on the Acquisition, Gal Haber, Chief Executive Officer of Plus500 said: “We are very proud to have built Plus500 in a short time into a significant player in the CFD market. Having been admitted to AIM at a share price of 115p on 24 July 2013 and paid significant dividends during this time, we believe that now is the right time to combine the business with Playtech who can provide additional infrastructure and expertise to add to our core skills in products, technology and marketing.”
To view the official press release, click here.