Home > Strategy > M&A > Playtech agrees to sell Finalto financial trading business for $210m

Playtech agrees to sell Finalto financial trading business for $210m

| By Robert Fletcher
Playtech has entered into an agreement to sell its Finalto financial trading division to a consortium led by Barinboim Group and backed by Leumi Partners and Menora Mivtachim Insurance in a deal worth up to $210m (£148m/€171m).
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The deal, also supported by key members of the Finalto management team, is worth up to $210m (£148m/€171m) and includes an initial up-front payment of $185m, with $15m of this deferred for up to two years.

A further $25m will be payable contingent on certain cash flow or other criteria being met by the business after the deal completes.

Playtech in March announced plans to dispose of non-core assets and simplify its business operations, with a strategic focus on its core gambling businesses. This came after seeing a 25.1% year-on-year decline in revenue to €1.08bn in its 2020 financial year.

The supplier had been evaluating its options over the Finalto business – formerly known as TradeTech – for some time, having been approached by a number of interested parties over a potential sale last year. This led to Playtech in August 2020 announcing that it would be open to selling the business.

In January of this year, Playtech revealed it was in discussions with the consortium over a possible sale, with this now having progressed to an agreement between the two parties and the Playtech board recommending shareholders vote to approve the sale.

If the sale were to complete in the current trading environment, which it said remains uncertain due to the pandemic, Playtech would retain any proceeds until there is greater market “clarity”. This, it said, would consequently reduce its net debt until the deal closes.

However, if the deal were to go through in the fourth quarter of this year as expected, and on the assumption that there is greater clarity in the market, the supplier said that it is committed to returning capital to shareholders when appropriate, while also balancing the opportunities to invest in the business.

Before the pandemic, the division had struggled, but it became a major driver of the supplier’s revenue in 2020, particularly in the first half of the year.

“Playtech has a stated strategy to simplify the group and today’s announcement is the conclusion of a two-year process in which Playtech has explored all routes to maximise value and certainty for shareholders from Finalto,” Playtech chief executive Mor Weizer said.

“The sale also offers a good outcome for all stakeholders in the Finalto business, providing certainty for colleagues, customers and trading counterparties. The consortium has a deep understanding of the Finalto business and the markets in which it operates and we wish our colleagues every future success.

“Looking forwards, Playtech will focus on its technology led offering in B2B and B2C gambling, driven by our online expertise and supported by a strong balance sheet. We have been building momentum in our business, as highlighted by our progress over the last twelve months in key markets such as the US, Latin America, and Europe. 

“The agreements we have signed with new customers in this period further demonstrate our capability as a leading technology provider and show the type of opportunities we intend to convert in the future.”

Confirmation of the agreement came as Playtech also published a trading update for the four months to 30 April, during which it said it continued to make progress against strategic and operational objectives, including in key target growth markets of the US, Latin America and Europe.

This included securing new deals with the Greenwood companies in the US and Holland Casino in the Netherlands, while it also noted a strong performance by Caliente and other operations in Latin America.

Playtech said online growth remained “very strong” in the period in both B2B and Snaitech, and as a result, it was able to increase its full-year adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) expectations.

This was despite its retail business continuing to feel the impact of the pandemic during the four-month period. Retail has now reopened in the UK, but closures in Italy have continued longer than expected, with sites in the country not expected to open until at least the end of June.

Breaking down these performances further, Playtech said that within its core B2B segment, online businesses performed well, though the retail focused parts of the business were impacted by closures for most of the period in key markets, particularly the UK and Greece.

Progress was made in the US through the strategic multi-state, multi-product deal with Parx casino operator the Greenwood companies. This has already seen content launch in Michigan, with further roll-outs planned for 2021 and 2022.

In Latin America, Playtech said Caliente was able to build on its position in Mexico, while WPlay in Colombia experienced further momentum. Playtech also noted its other structured agreements in Guatemala, Costa Rica and Panama progressed well and are set to become significant contributors to revenue over the coming years.

Turning to core B2C, while this segment was heavily impacted by Snaitech retail closures in Italy due to the pandemic, Snaitech’s online business continued the strong performance it delivered in 2020 into 2021.

In Asia, Playtech said its business in the region was stable, in line with the levels achieved through H2 2020.

Other key developments in the period included Brian Mattingley being appointed chairman designate. Mattingley is due to take over from Claire Milne, who had been serving as interim chairman, on 1 June.

In addition, Playtech took the decision to migrate its tax residency to the UK, and this has now become effective.

“I am delighted by the strong performance Playtech has delivered so far in 2021, despite the ongoing challenges posed by the pandemic,” Weizer said. “The sale of Finalto delivers on our strategy to simplify the company.

“We believe that due to the hard work and dedication of our employees, Playtech will exit the pandemic stronger than ever. Looking ahead, we are confident that the simplified group and the exciting growth opportunities ahead will deliver significant value to shareholders.”

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