Optimal’s Skrill takeover broadens reach

Optimal’s Skrill takeover broadens reach

Thursday, May 21, 2015
Joel Leonoff has called the acquisition a "game changer"

Optimal Payments will reduce its reliance on its biggest customer after reaching the final hurdle of its $1.1bn (€990m) purchase of rival Skrill.

The deal – which is likely to be given approval by the regulatory Financial Conduct Authority (FCA) in Q3 2015 - will see the combined reach of Optimal’s NETELLER and Skrill’s Paysafecard create the biggest player focused on the online gaming sector.

However, TotallyGaming.com understands the deal will be particularly significant for Optimal as it seeks to broaden its reach, having admitted that 37 per cent of its 2014 revenue came from a single unnamed gaming operator.

The deal will effectively double the size of the Optimal group and TotallyGaming.com has been told it could even produce greater savings than the $40m of synergy benefits suggested by the company in a Trading Update released today (Thursday).

Optimal recorded EBITDA of $86.1m and revenue of $365m in 2014, while Skrill reported a core profit of $89m and currently has around 36 million account holders.

“We were delighted with the response from all of our shareholders to the acquisition of Skrill which is a real game changer for us,” Optimal’s president and chief executive Joel Leonoff said.

“The enlarged Optimal Payments, on completion, will become a leading player in the markets we serve and create additional opportunities for further profitable growth.”

Isle of Man-based Optimal said that revenue in US dollars for the year to date for the company’s existing operations are in line with expectations not adjusting for the recent weakness of the Euro.

It said that on completion of the Skrill deal, the vendors will receive the agreed cash consideration of €720m and approximately 37.5 million new ordinary shares in Optimal, representing 7.9 per cent of the group’s enlarged issued share capital.

The growth in the group will also mean a likely departure from the FTSE’s Alternative Investment Market (AIM) to the main market, which creates a number of benefits for its members.

With a valuation of £1.179bn, an Optimal source said that the company has already outgrown the AIM and the prospect of increased liquidity and greater exposure through FTSE 250 membership could inspire further progress.

A Canaccord trading note seen by TotallyGaming.com read: “We believe the acquisition could drive earnings outperformance.

“We believe Optimal may exceed its cost saving target and we see further opportunities to save costs from platform, back office and brand consolidation over the medium term.

“In addition, we believe Optimal may be able to increase Skrill's relatively low e-wallet gross margins by applying pricing and sales strategies that have been successful at NETELLER.

“More generally, the combined group should benefit from increased scale, bargaining power and network effects.”


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