Analysis - why Playtech's acquisition of BGT is a masterstroke in omni-channel provision

Analysis - why Playtech's acquisition of BGT is a masterstroke in omni-channel provision

Friday, July 15, 2016 Posted by Andy McCarron
Playtech is now at the heart of omni-channel strategies for most of the leading operators

Playtech's latest acquisition, snapping up a 90% majority stake in Vienna-based Best Gaming Technology (BGT) for an initial €138m (£114.9m), has all the hallmarks of being another very savvy buy.

The buyout firmly secures Playtech's place at the heart of the multi- or omni-channel strategies for most of the leading operators in the UK, Italy and Spain. If the present consumer battleground is persuading land-based sports-betting retainers to embrace online with the same operator then the BGT self-service betting terminal (SSBT) offering is one of the key tools in aiding its switch.

The product provides a facsimile online offering in a box, largely independent of the system that many online operators use for either their over-the-counter (OTC) business or their online operations and would appear (from what figures we have seen from operators such as Ladbrokes) to be incremental to an extent in terms of revenues.

We'll soon know more about how Ladbrokes' augmented estate of 6,400 machines performed in the first half of this year when it reports in a few weeks' time but the figures from 2015 are impressive enough. SSBT net revenue rose 144% over the 12 months, representing 8% of total OTC stakes in the fourth quarter versus 3% in the first quarter of the year. Crucially, in the second half they helped push stakes up 1.3% while OTC net revenue rose 1.4% in the last six months of the year.

Equally of importance for Ladbrokes was that 76% of all SSBT bets were on football and 70% were placed as multiples (though it is interesting to note here that the percentage of singles is higher than with the OTC bets figures ex-SSBTs - 30% for SSBTs versus 27% for OTC).

Even the sceptical William Hill has moved to embrace the concept of SSBTs after previously being nervous of possible OTC cannibalisation under previous chief executive Ralph Topping. It introduced circa 500 machines to its estate ahead of the recent European Championships. But unlike its rivals on the UK high street, the company has not gone the BGT route but has instead plumped for its own proprietary system, with the help of Scientific Games.

William Hill is the only stand out from what would otherwise be a clean sweep of UK high-street firms for BGT which has thrived since it was founded in 2005, now supplying approximately 24,000 machines deployed across three main territories - the UK, Spain and Italy. Alongside the aforementioned Ladbrokes, it also works with Coral, Paddy Power Betfair and Betfred in the UK, Codere in Spain and Admiral in Austria.

According to the figures released from the Playtech stock exchange statement, in 2015 the company generated a pre-tax profit of €6m on revenues of €41.6m. In adjusted EBITDA terms, the company has generated almost as much in the first six months of 2016, €12.5m, as it did in the whole of 2015 (€12.9m). Playtech said the €138m represented a multiple of just under seven times forecast 2016 EBITDA, implying the company would hit an EBITDA of around £19.5m this year. Playtech paid for the acquisition in cash, and while founder Armin Sageder remains with a 10% stake in the firm with a three-year lock-in period, Playtech has a call option over the remaining stake which can be purchased at a price of up to six times 2019 EBITDA, up to a maximum of €55m.

For Playtech omni-channel has become one of the central planks of its proposition to customers. As chief executive Mor Weizer put it in announcing the deal, it sees full digitisation as the future for retail gaming. As such, being able to slot the already modularised BGT offering into its existing suite of products provides an immediate boost - indeed, the company said the acquisition would provide "high single-digit" earnings accretion in its first full-year.

But more than that, it more fully cements Playtech in the area of sports-betting provision. BGT doesn't just provide terminals, it has full digital capabilities with a proven sports-betting focus. Having (supposedly) missed out on OpenBet, it might be argued Playtech has bought its way into a more focused and profitable business that comes with far less integration issues. It should also be noted that the product also enjoys a central position in the blurring of lines between land-based and remote - according to Ladbrokes 30% of total SSBT bets were in-play in the fourth quarter.

The analysts are certainly keen. Simon French from Cenkos said in a note to clients that the deal "should prove highly complementary to Playtech’s existing retail products and services and accelerate the digitisation of the retail betting offer".

He added: “Playtech will be the only company to offer FOBTs and SBBTs, all integrated with its online platform and products and accessed by a customer using a single sign-on and single wallet. The acquisition will also accelerate its penetration of the Spanish and Italian markets as well as strengthening its position in the UK.”

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