Playtika sale belies valuation and provides some solace for Caesars

Playtika sale belies valuation and provides some solace for Caesars

Monday, August 1, 2016 Posted by Andy McCarron
The sale of Playtika for US4.4bn has far surpassed the valuation placed on the social gaming company

One of the imponderables of the 1,700-page long document judgment from the bankruptcy court in Chicago in April of this year was the value of the social gaming unit Playtika. Back in April the bankruptcy report from examiner Richard Davis suggested that a PwC valuation had put a price-tag on the business of $1bn-plus. Now we now that it has surpassed that figure by some margin.

Indeed, the $4.4bn that Chinese investors have stumped up for Playtika far surpasses previous estimates for the value of the business and represents a huge jump in valuation when Caesars bought the Israel-based company for a reported circa $80m.

The Slotomania operator has been the subject of acquisition chatter since the spring as parent company Caesars Entertainment Corporation has struggled with its mammoth debt load. The company’s main business unit entered Chapter 11 bankruptcy proceedings in January 2015 . The parent company owed a total of $28.2bn at the time.

The Playtika business was the primary driver of Caesars’ improved first-quarter result which saw revenues rise 6.7% to $1.2bn. Total interactive revenues (including the real-money online gambling businesses) saw revenues rise 28% year-on-year to $228m.

Now a consortium of Chinese-based investors has decided to step in and take the social casino elements of Caesars Interactive, leaving the parent with the real-money gambling interests such as World Series of Poker (WSOP).

The group is led by Shanghai Giant Network Technology Co and includes Yunfeng Capital, the private equity company founded by Alibaba Group chairman Jack Ma, China Oceanwide Holdings Group, China Minsheng Trust, and Hony Capital Fund.

In a statement the consortium said it was an all-cash deal. It added that Playtika would remain based in Israel and under the same management.

Robert Antokol, co-founder and chief executive of Playtika, said the deal was testament to the quality of output the company had produced in its six-year history.  "We are incredibly excited by the commercial opportunities the Consortium will make available to us, particularly in its ability to provide us access to large and rapidly growing emerging markets. This is an amazing milestone for all Playtikans and we truly value how unique this opportunity is to continue executing our vision with such a strong partner."

The statement reiterated that Playtika’s virtual currency system would remain just that with players unable to exchange credits for real money.

Grant Govertsen, analyst at Union Gaming in Hong Kong, noted that it appeared that the Chinese consortium was not overly concerned by the regulatory grey area that Playtika operated within when it comes to Chinese regulations. “These Chinese investors are more comfortable playing the long game,” he said. “Online gaming, eventually, should be massive after the various regulatory hurdles are worked out even if it takes a significant number of years.”

The deal is subject to regulatory approvals and will be completed later in the third or further quarter this year. Giant Interactive produces a number of massive multi-player online games popular in China including ZT Online.

Totally Gaming says: Caesars' bondholders will be celebrating this deal as much as anyone else. The $4.4bn goes some way to addressing the solvency issues at the parent company and leaves the interactive unit with a more clearly defined online gaming business, albeit shorn of most of its revenues. The future of the gambling industry's stake in social gaming less clear. 

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