Big Deal as Aristocrat Buys Playtech

Aristocrat Leisure Ltd. is putting up $2.9 billion in a bid to acquire online gaming content giant Playtech PLC, instantly putting the supplier in the middle of the booming U.S. iGaming market. The offer represents a 58 percent premium over the stock price as of October 15.

Big Deal as Aristocrat Buys Playtech

Aristocrat Leisure Ltd., the Australian slot machine manufacturer with games that are typically at the top of earnings surveys, long ago branched out into the system business with its Oasis 360 casino management system. It has also been at the forefront of free-play social gaming with its Big Fish Games subsidiary. However, the supplier has been behind other top slot suppliers in moving its content to for-money iGaming sites.

That’s about to change, as Aristocrat revealed last week that it has entered into an agreement to acquire the London-based iGaming platform and content giant Playtech PLC for a total consideration of £2.1 billion, US$2.89 billion. The offer, which Playtech told Reuters has the backing of its largest shareholder, represents 680 pence (US$9.35) per share, which is a premium of around 58 percent compared to Playtech’s closing price on October 15.

The deal places Aristocrat in the middle of the burgeoning North American online gaming and sports betting markets, worth an estimated $70 billion annually. The resulting merged entity would be one of the largest business-to-business platform providers in the global gaming industry. Playtech previously had issues entering the North American market because of previous business with grey-area markets. Regulators were concerned about Playtech ownership as well, but the deal with Aristocrat and its dozens of licenses in North America will eliminate those issues.

“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 game play and innovation,” Aristocrat Chief Executive Officer Trevor Croker said in a press statement.

“Additionally, the business will be ideally positioned to unlock sustainable shareholder value by seizing opportunities in the fast-growing online RMG (real-money gaming) segment as they continue to open up, particularly in North America.

“Adding Playtech’s talented team with Aristocrat’s established strengths and momentum will create a true industry leader in the global online RMG space, particularly in terms of our B2B capabilities.”

The Playtech deal is the latest in Aristocrat’s effort to expand its footprint into for-money iGaming. Aristocrat expects Playtech’s Italy-based omnichannel gambling operator Snaitech to open up new European markets as the supplier pursues North American iGaming partnerships.

In August, Aristocrat announced that it has entered into a number of deals to further expand its digital game development capability, with the addition of three new game studios for Aristocrat Digital, deepening its access to game development talent and studio capabilities in top-tier mobile game talent hubs across Northern and Eastern Europe.

The Aristocrat/Playtech deal also is the latest in a wave of M&A and partnership activity related to iGaming and sports betting, as suppliers move to capitalize on the surge in internet and mobile gaming activity that began with last year’s pandemic shutdowns.

Most recently, DraftKings’ $22.6 billion offer to acquire European iGaming and sports betting giant Entain, given an extension last week by regulators in the U.K., and the Nevada Gaming Control Board recommended approval of Bally’s Corp.’s proposed acquisition of Gamesys Group.

Earlier this month, Scientific Games Corp. announced that it has entered into a definitive agreement to sell its sports betting business, OpenBet, to Endeavor Group Holdings, Inc., a global sports and entertainment company, in a cash and stock transaction valued at $1.2 billion.

In September, Greentube, the interactive subsidiary of Austrian gaming giant Novomatic AG, announced it will enter the U.S. iGaming market through a partnership in New Jersey with Golden Nugget Online Gaming (GNOG).

In August, Scientific Games announced that it has signed an agreement to acquire Sideplay Entertainment, a leading digital “eInstant” content studio, to expand its portfolio of iLottery content; and Rush Street Interactive, Inc. announced that it has made a minority investment in Boom Entertainment, a premier game developer and technology provider that has created and operated some of the most successful sports gaming apps in the U.S.

Aristocrat said it plans to fund the acquisition by way of AU$1.1 billion (US$816 million) in existing cash, and a US$2.05 billion term loan and AU$1.3 billion (US$965 million) in equity raising by way of an entitlement offer, which was expected to launch last week.

The proposed acquisition could rise to a valuation multiple 15.5 times Playtech’s adjusted 12-month EBITDA, rather than 11.4 times as mentioned by the suitor, said a Monday note from David Bain, an analyst at Riley Securities Inc.

Bain noted Aristocrat’s stated intention to “review Playtech’s regulatory exposure,” likely involving some of Playtech’s ventures in Asia. “If the acquisition proceeds to completion, Aristocrat intends to conduct a review of the jurisdictions in which Playtech’s business operates, and the nature of Playtech’s business in certain jurisdictions to determine alignment with Aristocrat’s risk appetite and regulatory licenses to operate,” said Aristocrat in a presentation filed with the Australian Securities Exchange.