Pressure mounts on Playtech as Hong Kong fund bids $250m for Finalto
Gopher Investments raises the stakes and urges Playtech shareholders to vote against previously agreed sale of non-core financial division
Playtech has been put in a difficult position after Hong Kong-based private equity firm Gopher Investments went public with its $250m bid for the supplier’s Finalto financial division.
Playtech has already struck a deal to sell Finalto, formerly known as TradeTech, for $210m (£148m) to a consortium led by Tel Aviv-based private equity and venture capital firm Barinboim Group.
EGR understands UBS has been trying to find a buyer for the non-core division for the best part of two years now.
Interest increased dramatically during the pandemic, a period in which the product was a standout performer in revenue terms, and the Playtech board unanimously approved the Barinboim offer in May.
Today’s public bid from Gopher Investments seems set to disrupt a straightforward sales process however, as the counter offer looks significantly more attractive to Playtech shareholders on paper.
The $250m all-cash offer represents a premium of up to 47% on the current Barinboim offer Playtech management have minded shareholders to accept, according to Gopher Investments.
It said: “Gopher’s all-cash offer includes no deferred or contingent component, delivering full value up front and allowing Playtech to receive proceeds with certainty and in full on completion, securing the clean break which the board has declared as an objective of the transaction.”
EGR understands Playtech is already in advanced final-stage discussions with Barinboim Group and its partnering consortiums, with the initial offer set to be voted on by shareholders at a general meeting on 15 July.
Gopher, which holds a 4.97% position in Playtech, has urged fellow shareholders to vote against the Barinboim offer. This would free up the board to pursue a potential transaction with Gopher.
Gopher originally presented its $250m offer to Playtech’s board on 29 June.
It went public with the bid on 2 July after Playtech said in private it had limited flexibility to engage with Gopher under the terms of the previous sale and purchase agreement with Barinboim.
Playtech issued an RNS update on Friday evening.
It said: “Both Playtech and the consortium buyer [Barinboim] are bound by the restrictions agreed as part of the SPA, which includes not engaging in negotiations with any third party regarding a potential transaction involving the sale of Finalto, as is customary for transactions of this nature, especially where they have been concluded after a long and detailed formal process and which was in the public domain.
“The timing at which Gopher has chosen to come forward with its indicative proposal makes it very difficult for the Playtech board to properly assess the proposal, given the restrictions agreed in the SPA.
“It is unfortunate, in light of the long sale process run to date, that Gopher did not advise Playtech of its interest in acquiring Finalto at any point prior to 29 June 2021.”
The future of Finalto now effectively rests with Playtech shareholders, one of which is SpringOwl Asset Management CEO Jason Ader, who has confirmed his voting intention to EGR Intel.
“We support the Gopher Investments $250m offer for Playtech’s Finalto business,” said Ader.
“It’s evidence that UBS ran a flawed and inside process for the benefit of Ron Hoffman, the CEO of Finalto.
“The days of Playtech doing inside deals to the detriment of its shareholders are over. We support Brian Mattingley, the new chairman, and urge him to take this offer very seriously,” he added.
Peel Hunt analyst Ivor Jones said Finalto is not a major growth driver for Playtech and that strong 2020 performance may have been a one-off for the division due to the volatility of the financial markets during Covid-19.
For example, for the first four months of the 2021 financial year, Finalto made an adjusted EBITDA loss of $0.4m in aggregate.
“Finalto is not much use to Playtech so we are puzzled why Gopher wants to outbid the consortium,” said Jones.
“Given the length of time Playtech took to find a buyer for Finalto, we believe the board is right to stick with the relative certainty provided by the
consortium.
“We believe the most important thing for shareholders is simplifying the Playtech business, and the sooner this can happen the better.
“Why take hair-raising risks when a perfectly acceptable offer is on the table?” he added.