Playtika Rallies on Rumored Interest of Private Equity Firms

Posted on: June 8, 2023, 02:39h. 

Last updated on: June 9, 2023, 11:31h.

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

Shares of mobile games developer Playtika (NASDAQ: PLTK) surged Thursday. That’s following a report indicating at least two private equity firms are considering a takeover of the gaming company.

Joffre
Playtika is highlighted at the Nasdaq market site. Two private equity firms may be interested in buying the gaming company. (Image: Wall Street Journal)

Dealreporter reported Thursday that Advent International and CVC Capital Partners are kicking the tires on the Israeli gaming firm. That article surfaced about two months after another suggested unidentified private equity shops expressed initial interest in Playtika.

Investors liked the news. After Playtika stock was halted earlier in Thursday’s session for news pending, the shares are up 8.21% on volume that’s nearly double the daily average in late trading. That move has the stock flirting with a close at or above $11 for the first time since late April.

Formerly a unit of Caesars Entertainment, Playtika is the developer of popular social casino games, including Bingo Blitz, Caesars Slots, Slotomania, and World Series of Poker (WSOP) Social, among others.

Playtika Long Looking for a Deal

Playtika’s interest in a possible investment from an outside group or outright sale isn’t a secret. The company announced a strategic review, which could include a sale, in February 2022.

The acquisition prices Advent and CVC are considering weren’t mentioned. Playtika has a market capitalization of $3.96 billion, and Caesars sold it to a group of Chinese investors in 2016 for $4.4 billion. Today, that group, Playtika Holding UK II Limited (PHUK II), is the company’s largest shareholder.

That implies PHUK II holds considerable sway at Playtika, and it might not sign off on a transaction that values the mobile gaming company at less than $4.4 billion.

Previously, technology buyout fund Joffre Capital attempted to take a controlling interest in Playtika. But those plans were ultimately scrapped after Joffre Managing Partner and cofounder James Lu resigned from the Playtika board. On his way out the door, Lu lambasted the Playtika board for a lack of independence, claiming the directors were controlled by management.

Attraction to Playtika Understandable

Whether it’s a private equity firm or another gaming company, the purported interest in Playtika is understandable, because the firm is proficient at in-app sales. Playtika’s games are usually free to download and play. But game-play can be enhanced via revenue-generating, in-app purchases.

Some consumers decry that strategy because it requires outlays of real money for virtual chips or currencies that have no value outside of the game. That might not be of concern to Playtika suitors.

Speaking of suitors, CVC’s interest in Playtika is sensible because the investment firm already has some gaming exposure via Gaming1 and European sportsbook giant Tipico.

“Gaming1 is a leader in the Belgian gaming market and is present in nine countries around the world, including Portugal, France, and the United States with their joint venture Gamewise founded with the American giant Delaware North,” according to CVC.

Advent International’s current investment portfolio doesn’t feature direct gaming exposure. But the firm holds stakes in a variety of well-known consumer and technology brands, including Coffee Bean & Tea Leaf, Lululemon, and Transunion, among others.