Playtech plc (LON:PTEC) and subsidiaries, the leading platform, content and services provider in the online gambling industry, has announced that it has entered into a definitive agreement for the sale of Snaitech S.p.A. and certain of its subsidiaries to Flutter Entertainment Holdings Ireland Limited, a subsidiary of Flutter Entertainment plc, for a total enterprise value of EUR€2,300 million in cash.
Key highlights
· The Playtech Group agrees the sale of Snaitech, one of the leading Italian B2C sports betting and gaming companies in online and retail, to Flutter at an attractive valuation
· Following the completion of the Transaction, the Playtech Group will focus on its technology-led offering in high-growth B2B gambling markets with an accelerated growth plan and an extensive portfolio of strategic ventures
· The Transaction unlocks significant capital for the Playtech Group and is in line with the Playtech Group’s board of directors’ stated strategy to maximise value for all shareholders
· As soon as practicable after the completion of the Transaction, Playtech intends to return EUR€1,700 million – EUR€1,800 million to shareholders by way of a special dividend. The final amount of the Shareholder Distribution will be determined with reference to the capital needs of the ongoing Playtech business
Financial highlights and use of proceeds
· Total cash consideration of approximately EUR€2,300 million calculated by reference to a debt and cash free valuation basis and assuming a normalised level of working capital
· The Transaction represents:
o an enterprise value to Target Group (as defined below) FY2023 adjusted EBITDA multiple of 9.0x
o a substantial premium to Playtech’s enterprise value to FY2023 adjusted EBITDA multiple of 5.6x, as at close of business on 13 August 2024, being the latest practicable date prior to Playtech announcing it was in discussions with Flutter regarding the potential sale of the Snaitech business
o £6.27 per Playtech share, a premium of 16.5% to Playtech’s undisturbed share price of £5.38 on the Latest Practicable Date
· In addition to the Shareholder Distribution, following a review of the expected leverage profile of the Playtech Group following the disposal of the Target Group (as defined below), Playtech intends to repay the amounts outstanding on its bond due March 2026 of EUR€350 million, significantly strengthening the balance sheet of the Playtech business going forward
· Several of Playtech’s largest shareholders regard it as important that a revised approach to incentivisation is implemented as part of the Transaction. In this regard, shareholders who hold interests in ordinary shares representing, in aggregate, approximately 34.38 per cent. of the entire issued share capital of Playtech (excluding treasury shares) have written to Playtech expressing their support for the Transaction and the implementation of related incentive arrangements and, to the extent that shareholder approval is required or sought to implement any of such arrangements, have irrevocably undertaken to vote their shares in favour of such incentivisation arrangements at a general meeting which is to be convened. As a result:
o in connection with the Transaction, bonus awards have been made for a maximum aggregate amount of EUR€100 million to be paid to members of Playtech’s senior team, including Playtech’s executive directors (including Mor Weizer, who will be the largest participant) in the context of the anticipated substantial return to shareholders of between EUR€1,700 million – EUR€1,800 million referred to above, equivalent to approximately £4.56 – £4.83 per Playtech share and representing approximately 85 – 90 per cent. of the undisturbed share price of £5.38 on the Latest Practicable Date. This is subject to requisite shareholder approvals (including the approval of the revised directors’ remuneration policy in respect of the executive directors),
o in connection with the Transaction, a separate aggregate cash bonus pool will be paid to the Snaitech senior management team of EUR€34 million, of which Fabio Schiavolin (CEO of Snaitech) will be the largest participant
o a new transformation plan is to be implemented which, subject to certain shareholder approvals, is intended to align the executive directors and certain other members of Playtech’s senior team with the strategy to deliver further significant cash returns to shareholders beyond those due to be delivered as a result of the Transaction
· Further details of the Playtech Transaction Incentive Arrangements, the aggregate cash bonus pool for the Snaitech senior management team, the Playtech Transformation Plan and the timing of the shareholder circular and related general meeting are set out in Appendix 4 to this announcement
Rationale for and expected benefits of the Transaction
· The Playtech Group acquired Snaitech in 2018 for an enterprise value of EUR€846 million. Under the Playtech Group’s ownership, Snaitech has accelerated its online market share and enhanced its B2C retail offering. The Target Group’s adjusted EBITDA has improved from EUR€139.3 million in the year to 31 December 2017 to EUR€256.1 million in the latest reported year to 31 December 2023
· The Transaction provides a large value creation event for shareholders following the fundamental business model transformation achieved since acquiring Snaitech in 2018
· Opportunity for significant further upside from the Playtech Group’s renewed focus, post-Transaction, as a leading global gaming business operating in high-growth B2B gambling markets
· Following the repayment of the 2019 Notes (EUR€350 million), the Playtech Group will have a strong financial footing from which to execute an accelerated growth plan
· The simplified business model and focused B2B strategy will allow the Playtech Group to improve its market leading technology, positioning it to further grow its customer base and expand its share of wallet with existing customers
· The Board considers the Transaction to be in the best interests of the Playtech Group’s security holders as a whole given the large amount of value being realised in the Transaction and the opportunity it provides to return a very significant amount of cash to the Playtech Group’s shareholders
Further details of the Transaction
· The Transaction is expected to complete by Q2 2025, subject to relevant antitrust, gaming and other regulatory authority approvals
· The consideration is exclusive of the expected concession capex which is being borne by the Buyer’s group
· Under the share purchase agreement in respect of the Transaction, Playtech Services (Cyprus) Limited, a subsidiary of the Playtech Group, has agreed to sell Snaitech’s immediate holding company, Pluto (Italia) S.p.A., and Pluto’s subsidiaries excluding Trinity Bet Holding Limited and its subsidiaries to the Buyer
· Completion of the SPA is conditional upon certain regulatory approvals. It is also conditional on the completion of the transfer of HAPPYBET by Snaitech to Playtech Cyprus (a subsidiary of the Playtech Group which is outside the perimeter of the Transaction). The SPA will terminate if the regulatory conditions to completion of the SPA are not satisfied, deemed satisfied or waived on or before the long-stop date set out in the SPA
· The Buyer will have certain termination rights under the SPA in the event of a material breach of the fundamental warranties provided by Playtech Cyprus under the SPA or warranties given by certain members of the Pluto management on the date of the SPA under a separate management warranty deed
· A summary of the principal terms and conditions of the SPA is set out in Appendix 3 to this announcement
· The Transaction, because of its size in relation to the Playtech Group, constitutes a significant transaction for the purposes of the UK listing rules made by the Financial Conduct Authority for the purposes of Part VI of the Financial Services and Markets Act 2000 (as amended), which came into effect on 29 July 2024, and is therefore notifiable in accordance with UKLR 7.3.1R and 7.3.2R
· In accordance with the UKLRs, the Transaction is not subject to shareholder approval
Information on the Target Group
· The Target Group includes Snaitech which is one of the leading Italian B2C sports betting and gaming companies in online and retail
· The Target Group employs approximately 1,030 people in 8 sites in Italy
· The key individuals important to the Target Group are Fabio Schiavolin, Chief Executive Officer, and Chiaffredo Rinaudo, Chief Financial Officer
· In FY2023, the Target Group generated revenue of EUR€946.6 million, 55.4 per cent. of the Playtech Group revenue (after adjusting for intercompany), and adjusted EBITDA of EUR€256.1 million, 59.0 per cent. of the Playtech Group EBITDA (after adjusting for intercompany transactions)
· The gross assets of the Target Group as at 31 December 2023 were EUR€924.6 million
· Further information about the Target Group is set out in Appendix 4 to this announcement and historical financial information relating to the Target Group is set out in Appendix 1 to this announcement
Effect of Transaction on Continuing Group
· Playtech has separately reported the performance of the B2B and B2C divisions of the Playtech Group since Playtech’s results for the year ended 31 December 2017. The B2C division has included Snaitech since the acquisition in June 2018, which has been operated independently from the wider Playtech Group
· The Playtech Group’s B2C division reported revenue of EUR€1,037.0 million, including intercompany revenue between Snaitech and HAPPYBET of EUR€1.2 million, and adjusted EBITDA of EUR€250.3 million for the year ended 31 December 2023. After adjusting for intercompany transactions, Snaitech represented 91.2 per cent. of B2C revenues and 101.8 per cent. of B2C adjusted EBITDA for the year ended 31 December 2023. Following the completion of the Transaction, Playtech will no longer benefit from nor consolidate Snaitech in its financial statements
· The Playtech Group’s B2B division reported a revenue of EUR€684.1 million, including intercompany revenue of EUR€14.4 million, of which EUR€10.6 million is between the B2B division and Snaitech and EUR€3.8 million is between the B2B division and Sun Bingo, and adjusted EBITDA of EUR€182.0 million for the year ended 31 December 2023
· As announced by Playtech at 7:00 a.m. on 16 September 2024, the Playtech Group reached agreement on the terms of its strategic agreement with Tecnologia en Entretenimiento Caliplay, S.A.P.I. de C.V., a subsidiary of Corporación Caliente, S.A. de C.V.. As a result of the revised terms, which are expected to come into effect in Q1 2025, and based on assumptions for Caliplay’s ongoing operations as well as around the potential quantum and timing of dividend payments from Caliente Interactive, Inc. (which will be Caliplay’s new holding company), the Playtech Group anticipates the total cash flow relating to Caliplay is likely to be approximately EUR€30 million – EUR€40 million lower for 2025, versus 2024 on a normalised basis
· The Playtech Group’s management are focused on maintaining a strong cash flow profile and are exploring a number of strategies to optimise the cash flows for the Continuing Group
· An unaudited pro forma statement of the net assets of the Continuing Group, illustrating the effect of the Transaction on the consolidated net assets of the Continuing Group as if the Transaction had taken place on 31 December 2023, is set out in Appendix 2 to this announcement
Risks to the Playtech Group as a result of the Transaction
· Details regarding the risks to the Playtech Group as a result of the Transaction are set out in Appendix 4 to this announcement
Definitions for certain capitalised terms used in this announcement (including the Appendices to this announcement) are set out in Appendix 5 to this announcement.
Mor Weizer, Chief Executive Officer at Playtech, said:
“Under the Playtech Group’s ownership, Snaitech has grown into a high-quality business with a leading position in the Italian sports betting and gaming market. The business has an experienced and high-performing management team that has fully embraced the post-lockdown shift to omni-channel in Italy. Today, Snaitech has an established retail presence and online business that are both well-placed to continue their success in one of the most attractive markets in Europe.
“While Snaitech has been an important part of the Playtech Group’s growth in recent years, the Board agreed that this transaction represents a compelling opportunity to maximise value for our shareholders while also allowing them to share in further upside from continued ownership of a leading B2B business. The combination of the Playtech Group’s leading technology with its exposure to attractive markets, including in the Americas and Europe, provides a strong platform for growth in the medium-term. We are excited about what the future holds and the many opportunities ahead of us.
“In Flutter, Snaitech will have a new owner with an existing presence in Italy and all of the opportunities that brings. I’m confident that Snaitech will continue to excel under their ownership.”
