The Playtech and Aristocrat deal is one of the most closely watched and hotly debated potential acquisitions of the past year. Aristocrat Leisure – one of the most well-known companies in the gambling hardware (particularly poker machines) industries – tabled a bid worth $4 billion to buy Playtech. Playtech has made a name for itself as the largest developer of gambling and online gaming software in the world.
What Would The Buyout Have Meant?
The buyout would’ve resulted in a conglomerate with a huge amount of control over both hardware and software in the online gaming and gambling industry, which is why it was so closely watched by investors around the world.
Playtech is Known for offering software solutions for casino and mobile betting apps in the UK and globally, and with such an impressive portfolio under its belt, it stands to reason that people are interested in investing and being involved with the brand.
Of course, we don’t know what this would have meant long term for consumers because having one company in charge of such a large sector of any industry doesn’t always work well. Consumers tend to like to have a diverse choice when it comes to picking and choosing products and services and this buyout could have resulted in less choice for them, had it been able to go ahead.
What Happened With Negotiations?
However, the negotiations weren’t without drama. While Playtech is a highly successful company in its own right, the news of a potential sale made the share price rocket, going from around 40p per share to more than 60p at one point.
This new share price was well above what Aristocrat had originally offered which created some tension with the shareholders over the deal. In addition to this, this newly increased share price and level of interest attracted other companies to make rival bids.
One of these rival bids came from a consortium co-owned by Irish businessman and former Formula 1 boss Eddie Jordan and gambling industry leader Keith O’Loughlin. Finance Feeds reported that JKO Play (the consortium owned by Jordan and O’Loughlin) had approached Playtech with an initial takeover bid of 750pence per share. As a result, Playtech postponed the negotiation meeting with Aristocrat Leisure to give them time to do due diligence checks on JKO Play.
JKO Play was the third company to register their interest in buying Playtech in just one month, but they weren’t the only ones to drop out.
JKO Play ultimately withdrew their offer. In an interview with the Financial Times, Eddie Jordan said that he was concerned that a group of Asian investors had recently bought a large stake in Playtech and could potentially use this to block the deal.
Hong Kong-based investment firm Gopher was the second-biggest shareholder in Playtech when they made an offer to buy the company. Still, they also walked away from a deal, stating that they would instead buy a portion of the company for $250 million.
What Happened with the Aristocrat Deal?
While these rival offers ultimately didn’t get put to the shareholders, it still gave the Aristocrat deal an air of uncertainty. When the deal was put forward to Playtech shareholders only 55% approved it – well below the 75% agreement needed to trigger the sale. Jordan’s suspicions proved to be justified, as one of the biggest Hong Kong-based investors refused to enter into any communications with the Playtech board members. They then used their 28% stake in the company to block the deal.
What Does This Mean For The Future?
So what’s next for both companies with the deal now firmly off the table?
Aristocrat chairman Trevor Croker tried to minimise the negatives in an interview with the Financial Review, saying that the company was in no rush to replace the Playtech deal because real money gambling (including online casinos) is currently only legal in 7 US states. The CEO announced that they planned to focus on investing in themselves before looking at creating deals with any other companies.
Playtech has been put in a difficult situation by Hong Kong investors, which potentially shows. Playtech chairman Brian Mattingley tried to play down the worry by saying that he wasn’t disappointed by the failed acquisition.
He said that the process had highlighted how valuable the company is. Playtech is well known for having a history of struggling to attract buyers thanks to its complicated structuring.
Playtech are now planning to sell off parts of the company which could be an effort to simplify the complex structure, or it could be to push smaller sales through while the interest in the company and the stock prices are higher – it could also be a sign that they’re in need of a cash injection.
With the Aristocrat takeover bid blocked by the Hong Kong investors, it will be interesting to see where both companies go next -, particularly Playtech who are likely to have put off any other interested parties as long as the Asian investors are involved.
The Future of The Mobile and Gambling Industry
Although we can’t say for certain what direction the gambling industry is heading in, the fact that mobile betting apps are on the increase in terms of popularity goes to show that online casinos and betting apps will be around for a long time to come.
With such revenue being generated and the popularity continuing to rise it makes sense that there will be future company mergers and acquisitions, however exactly what these will remain to be seen. If you’re interested in this industry or planning to make any investments soon the best thing you can do is make sure you keep both eyes on industry news to see what happens next.
This news tends to move fast when it does happen, so keeping an eye on things and making sure you know what acquisitions are being talked about puts you in the best possible position.