Aristocrat Set to Take Massive UK Gamble
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Poker machine and technology group Aristocrat Leisure is asking shareholders for $1.3 billion to help fund a massive $5 billion purchase of UK-listed global gambling software group Playtech.
News of the huge deal and fundraising saw trading in Aristocrat shares halted yesterday to allow the placement to be done to investors at the big end of town.
The 46% jump in the value of Aristocrat shares so far this year has made the cash raising easier for the company and analysts say the raising – at $41.85 a share – will be unproblematic.
The modest 8.5% discount of the issue price to the last sales for the shares on Friday helps explain the confidence management has in shareholders willingly stumping up the cash.
Besides the $1.3 billion issue, Aristocrat will fund the acquisition with $1.1 billion of existing cash and $2.8 billion in loans.
Under the terms of the deal, Aristocrat is offering a cash price of 680 pence a share, representing a 58% premium over the Playtech closing price of 429 pence last Friday, October 15.
In something of a rarity, the issue will be an underwritten pro-rata accelerated renounceable entitlement offer with retail rights trading. This will provide a fair structure for Aristocrat shareholders compared to the take it or leave terms of many other fund raisings in recent years.
The rights trading will help the market price the deal on the basis of what shareholders think it will be worth.
Aristocrat reckons the purchase will add to its existing growth strategy over the medium term and deliver sustainable shareholder value. It is expected to be mid to high single digit earnings per share accretive during the first full year of ownership.
The Playtech Board is unanimously recommending that its shareholders vote in favour of the deal. Playtech directors who own Playtech shares have irrevocably undertaken to vote in favour of the takeover.
As well, Aristocrat says it has received letters of intent or irrevocable undertakings from a number of major Playtech shareholders, including Playtech’s largest shareholder. Combined, a total of approximately 63.4 million shares will be voting in favour of the deal, representing approximately 20.7% of Playtech’s outstanding shares.
Playtech has two main business segments: Business-to-Business gambling (B2B) and Business-to-Consumer gambling (B2C).
The B2B gambling operations include the design, development, and distribution of software and services to the online and land-based gambling industry.
It covers all key online real-money gaming (online RMG) segments, including casino, live casino, poker, bingo and sports betting, monetising via a revenue share model
Playtech’s B2C gambling operations predominantly consists of Snaitech (Italy), a vertically integrated retail and online business leveraging Playtech’s proprietary technology and capabilities.
As a leading Italy-based multi-channel gaming operator, it is free of any meaningful channel conflict with Aristocrat’s existing operations. Other B2C brands include HPYBET and SunBingo. HPYBET is Playtech’s retail sports betting B2C business, operating betting shops in Austria and Germany.
At the same time Aristocrat is looking at a substantial trading profit boost for the year to September 30.
Aristocrat said it expects an $864 million net profit for 2020-21.
This strong growth reflects positive performances across all its operations during the 12 months.
Aristocrat CEO and Managing Director Trevor Croker said in Monday’s statement.
“The proposed combination would bring together Aristocrat’s world-class gaming content and customer and regulatory relationships with Playtech’s industry-leading global online RMG platform and European B2C footprint.
“The combined group would offer a broad portfolio of end-to-end solutions for gaming customers around the world as well as seamless player experiences, underpinned by a shared focus on responsible gameplay and innovation.
“Additionally, the business will be ideally positioned to unlock sustainable shareholder value by seizing opportunities in the fast-growing online RMG segment as they continue to open up, particularly in North America.
