The Global Tote business provides pari-mutuel technology and services to horse race betting operators around the world.
This includes the Americas Tote business, which provides betting solutions, hardware and operational services to more than 200 racetracks, casinos and betting venues to more than 50 customers in the US, Canada and Latin America.
The acquired assets also include Sportech’s North America-facing white label digital betting solutions business, which has more than 25 customers on the continent, as well as its UK and European Tote operations, and its Quantum Tote betting engine.
It processed $12.2bn in stakes for the year to 31 December 2019, for clients across 37 countries.
The Global Tote business generated revenue of £30.8m and adjusted earnings of £5.6m over this period, and a pre-tax loss of £0.8m. For the six months to 30 June 2020, the business generated revenue of £12.0m, adjusted EBITDA of £1.6m, and a loss before tax of £1.2m.
The £30.9m purchase price is subject to an adjustment to reflect the level of working capital in the business, and the valuation of its pension liability, estimated at approximately £1.0m.
Of this consideration, 20% must be paid once Sportech’s shareholders vote in favour of the transaction, with the remaining sum to be paid in cash. The deal is due to go to a vote on the week starting 21 December.
The Sportech board plans to return the majority of this sum to shareholders, though when this happens will depend on investment opportunities, and general ongoing capital requirements.
BetMakers managing director Todd Buckingham said the deal would “supercharge” the supplier’s entry to the US market.
“BetMakers’ proposed acquisition of Sportech’s Global Tote business is part of our company’s international expansion plans to help power the excitement, growth and sustainability of horse racing globally,” he explianed.
“We consider the Sportech name to be synonymous with racing around the world, and we believe that BetMakers has the complementary knowledge and assets – and shared values built around a passion for racing – to help deliver ongoing success for clients, partners and all stakeholders in the racing industry.”
Buckingham added that BetMakers intends to retain all staff working for the business, and pledged to make “significant investments” in its operations to keep up with the “fast-moving sports betting industry”.
BetMakers is to fund the deal through a combination of existing cash and an AU$50m placement, which will be launched should Sportech’s shareholders vote in favour of the acquisition.
With Canaccord Genuity serving as lead manager and underwriter, and Taylor Collison acting as co-manager, it aims to issue 83.3m new fully paid ordinary shares, priced at AU$0.60 per share. This will be followed by a share purchase plan to raise a further AU$10m.
Sportech chief executive Richard McGuire said that the business’ transformation objectives included evaluating and executing on opportunities that deliver tangible investor returns.
“The board believe this transaction very much achieves that objective,” he said. “In addition to the range of opportunities which the net proceeds are expected to provide to the group, we believe the BetMakers product suite will further enhance the existing Sportech platform providing additional opportunities for global gaming clients.”
Should the deal be completed, Sportech’s business will consist of its Connecticut-based retail and online betting Venues division; its draw-based lottery solutions business, and the Bump 50:50 in-stadium raffles operation.
Completion is conditional on BetMakers receiving or waiving approval to transfer the relevant licences held by the Global Tote business. It also holds the right to terminate the deal if there is a material adverse change in the business, though once the initial 20% payment is made, this will be non-refundable.
Subject to customary closing conditions being satisfied, the deal is expected to complete in the first half of 2021.
The deal has been struck amid efforts to legalize fixed odds betting on horse racing in New Jersey, through Senate Bill 3090. Introduced by Senator Vin Gopal, it was passed by the Senate Budget and Appropriations Committee in November.
BetMakers has already started preparing for any potential roll-out, striking deals with PointsBet and New Jersey Thoroughbred Horsemen Association and Darby Development, operator of Monmouth Park racetrack, to deliver and manage fixed-odds horseracing into the state.
Sportech, meanwhile, was subject to a takeover bid in November, with New York-based investment fund Standard General making a £53.8m bid for the business.
This was rejected, with the Sportech board saying it “fundamentally undervalues [its] businesses and prospects”.