Joffre Capital Gives Big F-U to Phuk II Stake

Posted on: December 8, 2022, 02:04h. 

Last updated on: December 10, 2022, 07:10h.

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

Technology buyout fund Joffre Capital announced Thursday it’s pulling the plug on a previously announced plan to acquire a controlling interest in Playtika (NASDAQ: PLTK). Joffre cited issues at the mobile gaming company and with the seller of the shares, Playtika Holding UK II Limited (PHUK II).

Joffre
Playtika highlighted at the Nasdaq market site. Joffre Capital is canceling plans to purchase a stake in the gaming company. (Image: Wall Street Journal)

Joffre Managing Partner and cofounder James Lu also resigned from the gaming company’s board of directors, effective November 30. In late June, Joffre announced it would pay $21 a share to PHUK II for a 20% stake in Playtika, valuing the Israeli company at $8.5 billion. Prior to that announcement, the stock resided at around $14. Today, it trades around $8.40, with market value of $3.06 billion.

After several months of attempting to work with PHUKII, it has become clear that Joffre is not able to proceed to pre-closing outlined in the Purchase Agreement in part due to Playtika management’s domination of the Board, which is directly contrary to assurances made by PHUKII prior to signing the Purchase Agreement. Pursuant to the terms in the Purchase Agreement, we will seek to recover our initial payment to PHUKII, which we have requested be returned immediately,” said Lu in a statement.

Prior to the transaction being announced in June, Joffre paid PHUK II $59 million.

Joffre Finds Problems with PHUK II, Playtika

Playtika Holding UK is controlled by Chinese investors Giant Network Group Co. Ltd. and Yunfeng Capital. Yunfeng is a private equity group started by Alibaba founder Jack Ma. Playtika revealed in January that the investor was mulling the sale of 15% to 25% of its interest in the gaming company.

In a November 30 letter to the Playtika board, Lu details several reasons for his resignation and why Joffre won’t move forward with the share purchase. Those included slack governance practices and lack of response to a July letter he sent to the board regarding those issues.

He also cited “conflicts of interest driven by the Board being largely controlled by Company management” and “lapses and communications failures as a result of structural issues within the Board.”

Joffre Capital, which counts former Amazon, Baidu, Blackstone, Warburg Pincus, and Yahoo/Verizon executives among its principles, invests in digital media, e-commerce, interactive entertainment, and software companies.

Platyika was founded in 2010 and was acquired by Caesars Entertainment (NASDAQ: CZR) the following year. Facing a need for cash, the casino operator parted with the mobile games company in 2016, selling it to a group of Chinese investors for $4.4 billion.

Joffre Bullish on Playtika, But That’s Not Enough

Lu signaled enthusiasm for Playtika’s business model, but that doesn’t mean the tech investor will revisit a possible relationship with the gaming company.

As long-term investors who believe deeply in Playtika’s business, we are disappointed that we are unable to move forward with our acquisition of Company stock at this time,” he noted. “We were excited about the opportunity to help Playtika capitalize on its market position and growth prospects.”

Where Playtika goes from here isn’t immediately clear, but the company previously announced plans for a strategic review. It could revisit that effort, potentially looking for a suitor in the process.