Aristocrat’s $5 billion acquisition of Playtech has been blocked by a number of shareholders, temporarily ending ALL’s move into iGaming. Playtech may look to sell its B2B business which would certainly interest ALL. ALL’s core business remains in excellent shape.
ALL’s October announcement that it would acquire UK online real money gaming business, Playtech, for $5 billion was an ideal entry into the global iGaming industry which is in its infancy in the US but more developed in Europe.
The acquisition was fully supported by Playtech’s Board, but a shareholder vote (held this week) required 75% support and did not achieve this as a number of shareholders voted against what we thought was an outstanding proposal.
Part of Playtech’s business is a B2B gambling operation including design, development and distribution of software and services (casino, poker, bingo, sports betting) to the online and land-based gambling industry. Playtech make look to sell this business on its own and logically, ALL would be interested, but the tricky UK takeover laws will still need to be negotiated.
ALL’s plan B may include looking at other acquisition targets to give it instant scale in RMG (real money gambling). Playtech’s closest peer, Evolution, is probably too big for ALL to contemplate a move and alternative targets may already have been considered and possibly rejected.
For now, ALL has over $3.5 billion of cash to deploy if it can find the right target but we trust the company will be patient and thoughtful about its next move.
Investment view
The Playtech rejection is obviously disappointing but ALL remains in a very strong position in its core markets. We understand the land-based and digital businesses have entered 2022 with ‘excellent’ momentum on the back of product performance. ALL had 19 of the top 25 premium leased titles in the most recent industry survey (Eilers & Krejcik Game Performance Database).
If a suitable acquisition cannot be found, ALL may consider either debt reduction or some form of capital management although we expect the near term focus remains on acquisition.
The failed Playtech transaction is a reminder that acquisition activity carries some risk, but the underlying business of ALL is not affected. We maintain our Buy recommendation on ALL.
