Shares in the online casino software developer Playtech soared more than 50% this week as news broke of Aristocrat Leisure acquiring Playtech. The deal marks a major shift in strategy from Aristocrat Leisure that has been primarily focused on land-based real-estate in the casino sector for some time. Now they are realigning their focus and honing in on the booming digital gambling space, a move that will certainly help-future proof the growth of their bottom line.
The deal struck between Playtech and Aristocrat has value baked into its proposition, and will inevitably lead to a mutually beneficial partnership going forward. ©stevepb/Pixabay
The acquisition of Playtech by Aristocrat Leisure will help the group scale their sports betting infrastructure across the United States. With new federal laws allowing states to offer sports betting, there has been a gold rush from all sides of the industry to gain a first-mover advantage in the new enterprise opportunity.
Playtech has already set up bases in North America, with an office in New Jersey following the relaxation of restrictions on sports betting in the state. The Isle of Man-based technology company has for a long while been the pioneer of casino hardware, and more recently an innovator driving forward the quality of products in the software side of the online gambling industry around the world.
The new deal to acquire Playtech is expected to come with a package of mutual benefits for both parties. The purchaser will gain access to an incredible turnkey-solution for software delivery in online sports betting, and the acquired firm will get the large corporate backing it needs to become a true player in the global gaming space. Under the terms of the new deal, assurances are baked in to ensure the allocations of revenue are split dependant on growth of all counterparties in the agreement.
Teddy Sagi’s Playtech Reaching New Possibilities
When Teddy Sagi founded Playtech back in 1999 the world was on the cusp of a major dotcom boom cycle. The Israeli entrepreneur timed his entry to the market perfectly and envisioned how the world gambling economy would be completely reliant on software to run its infrastructure and continue to deliver amazing products to a growing userbase.
More than 20 years on, the billionaire founder of Playtech has already offloaded his shares in the group and moved on to other pursuits. Following the acquisition by Playtech, financial analyst firms across the region have been placing the target prices on the stock, with Peel Hunt raising their target price to 680p per share on Monday, representing a 58% rise in fortunes for holders of the stock during this period.
Aristocrat has been open about its hopes and intentions from the deal, detailing its desire to gain a stronger footing in the North America region, giving the firm all the strength and backing they need to make a meaningful impact when the time to grow arrives. Aristocrat, an Australian-based company already has an impressive portfolio with a presence in over 90 countries. The firm has become a key provider of casino hardware in all the regions it operates.
The firm will hope to provide perpetual value to its shareholders by unlocking new value streams in the markets where gambling legislations are becoming more favorable, particularly in North America. With the velocity of growth in the online gaming segment, there are numerous opportunities for the firm to deliver on its pledge to release increased earnings per share in the high-single digits.
Playtech Chief Sees New Distribution Possibilities
At the heart of this merger will be the mutually beneficial positioning that both parties in the deal will enjoy. It will unlock new opportunities to build stronger relationships with partners and improve the quality across the technology stack. From top to bottom, left and right, and all the way through this deal will accentuate the value for both Aristocrat and Playtech.
Aristocrat will be able to throw in a number of incentives when acquiring Playtech, enabling the firm to better navigate the sticky regulatory environment beyond the borders of Europe. Playtech is able to sidestep the difficult regulatory environment in some cases, they do this by offering remote gambling opportunities and supplying unlicensed operators with the means they need to start their own operations.
Any withdrawal from the traditional markets by Playtech is unlikely to have a significant impact on the bearing of any partners in the deal. Analysts working for several of the largest investment banks have stated the unregulated markets are tricky to navigate. The new joint-venture between these two large firms will undoubtedly have a profound impact on driving new growth across these regions.
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