JPJ Group to acquire Gamesys in £490m deal

JPJ Group has announced a “conditional agreement” to acquire the non-sports betting and gaming assets of Gamesys in a £490m deal.

The deal comprises a £250m cash payment and the issuance of 33.7 million new shares in the business, valued at a total of £240m.

The £490m figure is equivalent to a 7.3x multiple on Gamesys’ adjusted EBITDA.

Under the terms of the agreement, JPJ Group will acquire Gamesys’ brands and associated assets including Virgin Games, Virgin Casino, Monopoly Casino and Heart Bingo.

The deal excludes the newly-launched Virgin Bet brand, although it is still unclear what will happen to the sportsbook.

The enlarged business will be renamed Gamesys Group PLC and will see current Gamesys CEO Lee Fenton become CEO of the larger group, while Gamesys COO Robeson Reeves will become COO.

Fenton said the deal was a “strategically important transaction” which added scale and combined complementary capabilities between the two businesses.

“The enlarged group’s combined brand portfolio, strategically aligned operating structure, technology capabilities and exceptional combined talent base will create significant opportunities for growth in the market,” Fenton added.

JPJ Group’s share prise rose by almost 6% as news of the acquisition went public

JPJ Group executive chairman Neil Goulden and chief financial officer Keith Laslop will remain in their current roles, while JPJ Group CEO Simon Wykes will assume the role of transition director at completion for a 12-month period from completion of the acquisition.

Goulden said the deal would create a “truly leading UK and international operator” with enhanced product development and technology capabilities.

“The rationale for the acquisition of Gamesys is based on growth and both teams – at JPJ and our new colleagues joining us from Gamesys – are excited and motivated by the great opportunity which lies ahead,” Goulden added.

JPJ said that it had initially planned to proceed on a plan of “internalisation”, under which it would onboard operational staff from Gamesys.

However, this plan was later shelved as it would have been “a significant distraction which would have left both companies separate and potentially with conflicting strategies”.

The acquisition, which is expected to complete in Q3 2019, will allow the enlarged group to be listed on the FTSE 250 index.

Earlier this week, Gamesys was ordered to pay £1.2m by UKGC over failings in its AML and social responsibility procedures. The operator said that the acquisition by JPJ Group would “better position” the company to deal with further regulatory development should they occur.

Analysts Regulus Partners said the move signalled the end of JPJ’s “experiment” as an operator, consigning its prior business model into “the dustbin of history”.

“JPJ is perhaps lucky that is has the opportunity to buy a large and proven technology ‘winner’ with no material ‘dark grey’ revenue exposure or business practices to address, in a deal which actually reduces rather than creates integration and execution risk,” Regulus added.

Edison Group said the acquisition “appears to be a neat solution” for JPJ in that it gains control of the Gamesys platform, reduces reliance on third parties and should further improve the operators performance and margins.

“Gamesys brings a number of high-profile brands (Virgin, Heart Bingo, Monopoly – but not the sports brands), ownership of bingo and slot games studios, as well as a 15-year new content agreement. Integration risk is low given the longstanding relationship between the two companies and the Gamesys CEO will become the CEO for the enlarged group,” Edison added.