Aristocrat plans own iGaming platform after failed $3.9bn Playtech bid

Aristocrat Leisure says it will develop its own platform to capitalise on the booming online casino market after it failed in a $3.9bn bid for UK gambling software group Playtech.

Aristocrat Leisure CEO Trevor Croker: ‘Our commitment to a scale presence in online gaming will not change.’

Aristocrat Leisure says it will develop its own platform to capitalise on the booming online casino market – known as real money gaming – after it failed in a $3.9bn bid to acquire British gambling software group Playtech.

The company’s chief executive, Trevor Croker, lashed a bloc of investors – led by Hong Kong-based former Playtech boss Tom Hall – who voted against the deal, saying they bought into Playtech after the offer was made.

“It was a recommended offer by the board and supported by the majority of Playtech shareholders who voted,” Mr Croker said. “But there was a number of material investors who had not engaged … and overwhelmingly cast votes against, which effectively blocked the deal.

“Based on public disclosures, the majority of these shareholders arrived on the Playtech register after the recommended acquisition.”

Barrenjoey Capital Partners equities analysts told clients that rejection by Playtech shareholders was “clearly an outcome that has become more likely as the deal progressed” but said the outlook remained “strong” for Aristocrat. “We recently upgraded our forecasts for stronger US participation and higher digital revenue,” they wrote.

“Underlying performance appears very strong in our opinion, and we forecast an average of about 20 per cent (earnings per share) growth per annum over the next three years.”

Aristocrat shares fell 20c to close at $41.09 on Thursday.

The opposing investors, who had amassed shares amounting to about 28 per cent of the company, include Paul Suen, the owner of Birmingham City Football Club, Karen Lo, the billionaire heiress, and Stanley Choi, the professional poker player.

Playtech created a last-minute hurdle last month, telling its investors it was continuing discussions with potential rival bidder, JKO Play, run by Irish businessman and motorsports identity Eddie Jordan. This delayed a shareholder vote on Aristocrat’s bid until Wednesday evening.

“Obviously, it’s a disappointing outcome,” Mr Croker said. “(But) our commitment to a scale presence in online gaming will not change. This is an important plank in our growth strategy.”

Analysts had praised the potential acquisition as “transformational” when Aristocrat revealed its hand last October, saying it would position the company to capitalise on the fast-rowing virtual gaming market.

“Furthermore, buying (versus building) the platform should reduce the execution risk associated with adoption or timing, especially with respect to player account management,” Ord Minnett analysts said at the time.

But Aristocrat is now planning to do just that, with Mr Croker declaring that it is also an “R&D company” and is about to launch a remote gaming server, which underpins virtual gaming, in the US.

“It’s a capability we have been building for some time. We have mentioned the fact that we are in the R&D business and we are looking to accelerate our scale,” Mr Croker said.

“IGaming, North America … leveraging our strong content in that marketplace, our customer relationships and strong regulatory relationships … becomes our core focus. Other attractive markets are obviously Europe … But our focus is North America. It is the largest market and it’s only just starting to open up,” he said on Thursday.

Aristocrat expected to pay $266m in costs associated with the deal, but the figure is expected to fall now, given it will not have to pay success fees.

The failure to secure the deal also gives Aristocrat more firepower to fund other mergers and acquisitions, although it will be difficult to find another target of Playtech’s scale.

“We have the capacity both to invest in our own business and to also pursue alternatives. We are very cash-rich and have the balance sheet capability and the financial discipline to do the right things,” Mr Croker said.

“There are a number of listed companies (that are similar to Playtech) but there are also technology businesses and platforms that have been built that are unlisted ones. We see options to actually achieve our objectives through either listed or unlisted solutions.”