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Playtech shares surge after agreeing to takeover by Aristocrat

Shares in online gambling software company Playtech soared by more than 50 per cent on Monday after the group agreed to a £2.7bn takeover by Australian slot machine developer Aristocrat Leisure.

The acquisition of Playtech, which was founded by Israeli billionaire Teddy Sagi, will help to increase Aristocrat’s scale in the online sports betting market in the US. Isle of Man-based Playtech has recently expanded in North America as states including New Jersey have relaxed rules allowing online gambling and sports betting to take place.

The deal is also expected to provide growth channels for Aristocrat’s casino business.

The offer agreed by Playtech values the company at 680p a share, a 58 per cent premium to Friday’s closing price. Peel Hunt analysts raised their target price from 600p to 680p. Playtech’s shares rose 57 per cent on Monday to 675p. 

Playtech was founded in 1999 by Sagi to provide online gaming software to many of the world’s biggest gambling companies. He floated the company 15 years ago and sold his remaining shares in the group in 2018.

Aristocrat said it hoped to benefit from Playtech’s presence in North America and Europe, which it expanded via the 2018 takeover of Italy-based Snaitech and a series of launches in US states in recent years.

Aristocrat is an Australian gaming company that operates in more than 90 countries. It produces games and manufactures gambling machines for physical casinos.

“The business will be ideally positioned to unlock sustainable shareholder value by seizing opportunities in the fast-growing global online segment as they continue to open up, particularly in North America,” said Trevor Croker, Aristocrat’s chief executive.

Aristocrat expected to realise additional earnings per share in the high single digits in the first year after purchase, the company said.

Mor Weizer, chief of Playtech, said the deal “has the potential to enhance our distribution, our capacity to build new and deeper relationships with partners, and bolsters our technological capabilities”.

Aristocrat stated in its offer that it would review Playtech’s operations in unregulated markets.

Playtech and other online gambling companies are able to sidestep restrictions in some markets, including Asia, offering remote gambling services and supplying unlicensed operators by using resellers. But authorities in China have recently been cracking down on online casinos and restricting access to these sites.

Analysts at Morgan Stanley expected that any withdrawal from such markets would only have “limited impact”.

“We think this withdrawal would most likely be its Asian revenue,” they stated.

Brian Mattingley, chair of Playtech, said: “Realistically it’s down to Aristocrat. They stated they will review unregulated markets and that is Aristocrat’s decision.”

The companies expect the deal to complete in the second quarter of 2022, subject to shareholder approval.

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