Playtech confirms $200m sale negotiations for Finalto

Playtech is in exclusive discussions with a four-firm consortium regarding the sale of its financial arm Finalto.

Responding to reports and speculation from Israeli media, the London-listed supplier confirmed the talks regarding a potential $200m agreement for the subsidiary, which was previously deemed a “non-core asset” by the firm.

Finalto was formerly known as TradeTech and has performed exceptionally well throughout the Covid-19 pandemic.

The consortium is backed by a mixture of Israeli investment and insurance firms, including Barinboim Group, Leumi Partners, The Phoenix Insurance Company and Menora Mivtachim Insurance.

The consortium has made a cash offer of up to $200m, with $170m to be paid upon completion of the sale.

Playtech confirmed that the approximately $110m of capital required to run Finalto would be transferred with the business in any potential sale.

In a statement, Playtech said while discussions regarding the sale were ongoing, there was no definitive certainty they would come to fruition.

Playtech said: “As Playtech has announced previously, including in its trading update on 12 January, it is a strategic focus of the company to simplify its business and dispose of non-core assets, and as such it has been continuing to evaluate all options for Finalto.

“Whilst discussions are progressing, there can be no certainty that any transaction will be forthcoming nor on what terms it would occur,” the statement concluded.

Peel Hunt analyst Ivor Jones said the deal was “close to a fair value” and allowed Playtech to continue its much-needed business streamlining efforts.

Jones said: “Financials business has been non-core for some time. Management has trailed the sale of financials by referring to it as non-core; it has taken a while to find a suitable buyer.

“We believe that the disposal is at close to fair value. However, we see disposal as an overall positive for Playtech as it eliminates a complex business with a volatile earnings stream and makes evaluating the core business easier,” he added.

Jones went on to state that a failure to deliver a comprehensive strategy when it came to Playtech’s financial arm meant the sale was a sensible move.

“On the face of it, the financials business made sense for Playtech when it acquired TradeFX in April 2015 (for an initial cash payment of €208m) from Playtech founder Teddy Sagi and then added CFH in 2016 (for €39.8m initially).

“The technology platforms for online gambling and financials trading had similarities, as did the customers. Had Playtech succeeded in buying Plus500 and AvaTrade, then its financials business would have had meaningful scale.

“However, having failed in those bids, and in the context of negative regulatory change, we believe it makes sense for Playtech to exit the financials trading market,” he concluded.

Playtech’s stock price fell by 4.14% to 478.30p following confirmation of the discussions. It has since recovered to 483.60p.