The Aristocrat Leisure Limited (ASX: ALL) share price is on watch after announcing a proposed buy of Playtech PLC (LON: PTEC).
Aristocrat Leisure is one of the world’s leading makers of casino gaming machines.
Aristocrat’s proposal to buy Playtech
Aristocrat Leisure is proposed to buy the UK-listed Playtech business for £6.80 per share.
This offer values the entire business’ shares on issue (and to be issued) at £2.1 billion, or A$3.9 billion in Australian dollar terms.
The offer represents a premium of approximately 58% to the last price on 15 October 2021 of £4.29.
What is Playtech?
Aristocrat Leisure described Playtech as a leading technology provider that develops platforms and content for the global gambling industry. Aristocrat thinks it’s one of the world’s largest online gambling software suppliers and has built a strong track record.
Playtech has over 7,000 employees across 24 countries, 170 global licensees and is regulated in 30 jurisdictions.
The UK company has a business to business (B2B) gambling segment for making software and services for the online and land-based gambling industry, including “casino, live casino, poker, bingo and sports betting.” It makes money through a revenue share model.
Playtech’s consumer segment predominately consists of a leading Italy-based gaming operator called Snaitech and doesn’t really compete with Aristocrat Leisure’s existing operations. Other consumer brands include HPYBET and SunBingo.
It also has a financial services business called Finalto, though this is being divested.
Why could this be a good acquisition?
Aristocrat Leisure pointed out a few different things about the benefits.
Firstly, management said it’s getting good exposure in the US$70 billion online real money gaming (RMG) segment, offering revenue and profit growth potential, particularly in the fast-growing North American online RMG sector.
It can combine Aristocrat’s “industry leading” gaming content and long-term customer and regulatory relationships with Playtech’s technology and platform.
Aristocrat Leisure is also attracted to the Snaitech business, which will give it access to the European market.
Financial details
The acquisition represents an ‘adjusted EBITDA’ (EBITDA explained) multiple of 11.4x for FY21.
Playtech’s board thinks the offer is fair and reasonable and has unanimously recommended the deal to Playtech shareholders.
Summary thoughts
The Aristocrat Leisure share price has risen 48% over the past year. A recovery has certainly been priced in (and more).
The deal seems compelling for Aristocrat and doing a capital raising at $41.85 per share to raise $1.3 billion seems like a smart idea. It will add to earnings in the first full year of ownership. More digital earnings and more global diversification certainly seems like it will improve the company’s profit and growth potential.
There are several ASX growth shares that are also growing internationally which could be interesting ideas.
