Aristocrat Completes Purchase of Playtech for $3.7B

Aristocrat, an Australian online slot machine manufacturer, has agreed to buy Playtech for a total of $3.7 billion in an enterprise value deal.

Officially announced on Monday, the sale of Playtech will be completed via Aristocrat’s wholly-owned subsidiary Bidco if the two parties agree to the deal’s other terms and conditions.

The Australian firm proposed to buy Playtech’s shares for $9.35, a nearly 58% premium to Playtech’s closing share price on October 15. On a fully diluted basis, this values Playtech’s whole issued ordinary share capital at over $2.9 billion, and on an enterprise value basis, it’s around $3.7 billion.

Aristocrat has already received letters of intent or irrevocable undertakings from Playtech shareholders representing 20.7% of the company’s outstanding shares. According to a filing, the Playtech board unanimously recommended that remaining shareholders vote in favor of the scheme.

Aristocrat, an Australian slot machine manufacturer, has agreed to buy Playtech for a total of $3.7 billion in an enterprise value deal.

Why Aristocrat is Interested in Acquiring Playtech

The acquisition of Playtech, according to Aristocrat, will accelerate the company’s growth strategy and provide strategic benefits. Aristocrat hopes that these benefits will include increasing its scale in the $70 billion online casino gaming market as well as medium-term revenue and earnings growth. Finally, the slot manufacturer will be looking to meet a broader range of customer and player needs and gain the ability to operate and innovate in multiple European and North American markets.

Aristocrat is particularly interested in the North American market, which has grown rapidly over the past few years. Thanks to changes in gambling laws and regulations, many US states now allow online casino gaming, providing a huge opportunity to operators and casino software developers. By purchasing an already established software provider, Aristocrat hopes to gain a share of this growing market.

Combining Two iGaming Giants

Aristocrat has been in business since 1953, originally producing mechanical slot machines that are today considered collector’s items. The company made a name for itself with the innovative Clubmaster machine, which combined new technology to offer the first-ever poker machine with fully lit reels and scorecard.

From this point on, Aristocrat casinos expanded into new markets, including Europe and North America, releasing the Aristocrat Nevada machine in 1961. Over the decades, the company continued to grow and develop new technology to make slot machines more exciting and easier to play. By the 90s, the company had been publicly listed on the Australian Stock Exchange and would go on to hold operating licenses in Las Vegas and Macau.

Earlier Acquisitions & Brand Development

Although Aristocrat has continued to manufacture slot machines, they’ve changed a lot from the early days of the company. In addition, there have been multiple acquisitions of online gaming companies along the way, including Product Madness, Plarium, Big Fish, and now Playtech casinos. The slot manufacturer is now fully committed to both online and land-based casino game development and continues to innovate.

Playtech is Aristocrat’s biggest acquisition yet, and the Australian company will be buying one of the most successful slot manufacturers in the European market. Playtech is much younger than Aristocrat but still has a lot of history in the industry. Established in Estonia in 1999, the developer’s games were first licensed by a casino in 2001. Since then, it’s also gone on to found the world’s largest poker network, began trading on the London Stock Exchange, and began working with some of the biggest online gaming operators in Europe.

What Does This Mean For Aristocrat and Playtech?

The combination of Aristocrat and Playtech is a formidable partnership between two companies with a lot of experience in the industry. According to Aristocrat CEO and managing Director Trevor Coker “The proposed combination would bring together Aristocrat’s world-class gaming content and customer and regulatory relationships with Playtech’s industry-leading global online RMG platform and European B2C footprint.”

He went on to add, “The combined group would offer a broad portfolio of end-to-end solutions for gaming customers around the world as well as seamless player experiences, underpinned by a shared focus on responsible gameplay and innovation.”

“Additionally, the business will be ideally positioned to unlock sustainable shareholder value by seizing opportunities in the fast-growing online RMG segment as they continue to open up, particularly in North America.”

Becoming an iGaming Giant

The combined company will have 170 global licensees and employ personnel in 24 countries and territories, including seven content studios. It will also operate in 30 regulated markets around the world.

The agreement would also allow Aristocrat and Playtech to satisfy a greater range of client and player needs, while Playtech’s Snaitech business provides them a B2C footprint in numerous European regions, according to Aristocrat.

“Adding Playtech’s talented team with Aristocrat’s established strengths and momentum will create a true industry leader in the global online RMG space, particularly in terms of our B2B capabilities.” – Trevor Coker (Director)

The deal is expected to generate strong financial returns. The combined Aristocrat share price is expected to rise in the low to mid-single digits before synergies before then rising in the mid- to high-single digits once synergies are realized.

The Thoughts of Playtech’s CEO

Playtech CEO Mor Weizer described the combination as “an exciting opportunity in the next stage of growth for Playtech” that would deliver significant benefits to stakeholders.

“This deal has the potential to enhance our distribution, our capacity to build new and deeper relationships with partners and bolsters our technological capabilities,” he explained. “The combination of our two companies builds one of the largest B2B gaming platforms in the world, with the people, infrastructure, and expertise to provide our customers with a truly best-in-class offer across all areas of gaming and sports betting.”

Expansion Into New Markets

Together with Playtech, Aristocrat hopes to capture more of the online real money gaming market that is emerging in North America. The move will allow it to continue to build its presence in the US, forming partnerships with online casino software developers that are fast becoming regulated throughout the continent. USA online casino gaming is becoming more widely accepted throughout the country with many states now regulating these sites.

In addition to its ambitions to conquer the North American market, Aristocrat undoubtedly has its eyes set on Latin American too. This region is quickly becoming more open to gambling regulations, and many of the big European operators have already begun to make moves in this region. If countries in Latin America decide to bring in new regulations and open up the market, it could be a very lucrative area.

Additionally, the business will be ideally positioned to unlock sustainable shareholder value by seizing opportunities in the fast-growing online RMG segment as they continue to open up, particularly in North America.
Trevor Coker, CEO & Managing Director of Aristocrat

What Does the Future Hold For Aristocrat and Playtech?

The deal between Playtech and Aristocrat is still subject to a variety of regulatory clearances and closing conditions, including the approval of at least 75% of Playtech shareholders. The Playtech board is expected to propose that the purchase be approved.

Aristocrat expects to fund the acquisition with a combination of current cash resources, new lending facilities, and an equity issue of ordinary Aristocrat shares. After purchasing Playtech, Futureplay, and Playsoft, Aristocrat also intends to open a development facility in Finland and open up the Aristocrat Digital division.

Aristocrat Digital will have a focus on casual gaming as well as social casino markets. These games are still popular even in areas that have legal online gambling, and they can be just as lucrative. While Aristocrat remains focused on real money gaming, the Digital division will be able to explore new markets.

References:

Bloomberg, 2021