Shares in Playtech (LSE:PTEC), a technology provider to the gambling industry, rocketed from 430p to 673p on Monday following news that the group had agreed a takeover offer from Aristocrat Leisure (ASC:ALL), the Australian slot machine manufacturer.
Playtech shareholders are set to receive 680p per share and the board is recommending that shareholders approve the offer – it needs 75% of shareholders to vote their approval at an AGM which has yet to be scheduled. According to Danni Hewson, financial analyst at AJ Bell, over 20% of shareholders have already indicated they will accept the offer.The acquisition values Playtech at around £2.1 billion and while some might say that this is easy money – the offer is at a significant premium to Monday’s price – it is worth noting that between 2013 and 2018, the Playtech share price ranged from 800-1000 pence.
And as Hewson says, “even if 75% vote in favour and it goes through, that’s not the end of the story. This deal will be scrutinised by the appropriate regulatory bodies and will take months, assuming there are no nasty surprises the deal won’t be done until spring 2022.”
Aristocrat and Playtech: a perfect pair
According to Aristocrat which has a market capitalisation of approximately AU$29.2 billion (£15.8 billion), combining with Playtech will provide it with material scale in the already large and growing iGaming and online sports betting segment. Zion Market Research estimates that the global sports betting market will be worth $179.3 billion by 2028.
Aristocrat says that the Playtech deal should also boost revenue and earnings for them in the North American real-money gaming (RMG) segment while also meeting a broader target market which includes expansion in European markets through Playtech’s Snaitech business.
Danni Hewson, financial analyst, AJ Bell: “The two businesses fit together like peas in a pod. Playtech is one of the largest online gaming software suppliers in the world and Aristocrat Leisure supplies software and hardware to casinos as well as still whipping up slot machines, which is where it all began. It’s thinking about the very attractive US market which is ripe for the picking since the Supreme Court decided to legalise sports betting and looks set to become a massive market.”
Buy, sell or hold
With the share price trading just under the offer price, investors might be tempted to buy in order to gain at least a small profit, but as Hewson says, “there are no guarantees that the deal will go through and right now a bidding war seems unlikely: firstly because, behind the scenes, Aristocrat has been sent packing several times before it came up with a fair offer, and also rival company, Entain is also ripe for takeover and dancing with its own suitor. With the current premium, it will be extremely tempting for investors to get out while the going is good.”
