Aristocrat Acquiring Playtech, Deal Values Target at $3.71B

Posted on: October 17, 2021, 06:39h. 

Last updated on: October 17, 2021, 06:51h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Aristocrat Technologies, one of the world’s largest makers of gaming machines, is acquiring rival Playtech for 680 pence ($9.35) in cash — a 58.4 percent premium to the target’s Oct. 15 closing price.

Aristocrat Playtech
Slot machine giant Aristocrat Gaming is getting bigger. It’s buying Playtech for a 58 percent premium. (Image: FOX5 Vegas)

The offer values UK-based Playtech at $3.71 billion on an enterprise value basis, which is a combination of a company’s market capitalization and outstanding debt. Australia-based Aristocrat is funding the acquisition with a mix of cash on hand, a term loan, and equity issuance.

Playtech makes software for internet casinos, web-based poker rooms, and online sports wagering, making the company somewhat comparable to GAN Ltd. (NASDAQ:GAN). Playtech also provides software for fixed-odds arcade games, online games, and provides services for scratch games. It was founded in Estonia more than two decades ago, and is headquartered in the Isle of Man. Aristocrat’s courtship of Playtech is aimed at bolstering its offerings in the fast-growing iGaming and regulated sports wagering industries.

Aristocrat believes that a combination with Playtech will provide Aristocrat with material scale in the already large and growing iGaming and online sports betting segment,” according to a statement issued by the Australian company. “This represents an estimated total addressable market of approximately $70 billion globally.”

It’s rumored that the two sides have been holding talks for months.

Aristocrat Targeting North America

While Aristocrat has a substantial foothold in the North American gaming market by way of selling slot machines to land-based gaming venues, it lacks significant exposure to online casinos and sports wagering.

The Playtech purchase could ameliorate that situation for the Australian suitor, and at just the right time. Goldman Sachs recently estimated that by 2033, the US iGaming and sports betting markets will be worth $39 billion and $14 billion, respectively, notching compound annual growth rates (CAGR) of 40 percent and 27 percent between now and then.

The Playtech deal could “deliver medium-term revenue and earnings growth, in particular in the fast-growing North American online real money gaming (RMG) segment, combining Aristocrat’s industry leading gaming content, long-term customer and regulatory relationships with Playtech’s technology and platform,” said the buyer in the statement.

Playtech, which has long been rumored to be a takeover target, is one of the leading gaming software developers in the world. It has deep expertise in creating platforms for online and land-based casinos.

Another Win for Ader

Aristocrat acquiring Playtech is another victory for Jason Ader’s SpringOwl Asset Management, which took a stake in Playtech in 2018. He’s favored Playtech selling itself, saying in August 2020 that DraftKings (NASDAQ:DKNG) should acquire the British company to improve its tech stack.

Obviously, that deal didn’t come to fruition. But Ader’s firm is likely making out well with the Aristocrat offer. New York-based SpringOwl owns roughly five percent of Playtech equity.

The deal announcement comes just two days after Ader’s special purpose acquisition company (SPAC) 26 Capital (NASDAQ:ADER) agreed to merge with Okada Manila, so that the Japanese operator of the integrated resort in the Philippines can go public on a US exchange.