M&A discussions a constant for Playtech board

M&A discussions a constant for Playtech board

Monday, February 13, 2017
Confidence high at ICE Totally Gaming say analysts

The Playtech board discusses between three and five potential acquisition opportunities every time it meets, according to a note from analysts at Morgan Stanley who met up with the company at ICE last week.

Playtech announced its latest bout of M&A activity on the morning of the first day of the exhibition at the ExCel in London last week when it said it had bought up the bingo games supplier Eyecon for £50m.

In meeting up with the company, the M Stanley team pointed out that with circa €400m of excess cash sitting on the balance sheet as of the end of 2016 and with further strong cash generation expected for the years ahead, the company had scope for further activity.

“Management said it continues to prefer acquisitions over buybacks, and consider the recent €50m of share purchases as an appropriate signal of confidence to the market without affecting capacity for M&A,” the analysts wrote.

They added that the news about the regular board discussions of M&A prospects and targets “underlines both the seriousness of this commitment and the size of the opportunity set in a fragmented industry.” Playtech told M Stanley there was no preference for deals in the gaming vertical or financials.

After visiting the ICE Totally Gaming show the analysts noted that the mood from the show was upbeat, adding that the optimism was displayed by the show's key metrics. The number of exhibitors was up to 500 this year, taking up a total of 41,000 square metres. Three-quarters of the space was taken up by interactive suppliers and of these the Morgan Stanley team noted that 180 were offering sports-betting infrastructure supply including odds, risk management and data feeds. They noted this was up from 141 in 2016 and just 40 two years' ago.

“This suggests barriers to entry in the sports betting industry continue to fall, with many of those suppliers offering full turnkey solutions,” the note added.

The team also took soundings from suppliers of fixed odds betting terminals in the UK regarding the upcoming triennial review and its likely impact. The general impression, they suggested, was that there is still a huge degree of uncertainty with regard to timing and outcome. However, the consensus view was that an estimated cut to £20 maximum stake from £100 (the Morgan Stanley bear case for the high-street bookies) would amount to low double-digit impact on machine revenues. They added that this was better than existing market expectations.

Totally Gaming says: The relentless nature of the Playtech M&A hunt is demonstrated by these comments regarding the board-level discussions. There can be no doubt that more deals will be forthcoming across both gaming and financials. In the case of the first – and given the statistics regarding the rise on sports-betting infrastructure suppliers at ICE last week – it shows there is plenty of potential prey in that quarter.

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