Aristocrat could target Playtech unit: analysts

Having failed in its bid to buy Playtech outright, analysts thing Aristocrat could now look to buy Playtech’s business-to-business unit. Picture: AFP

Aristocrat could line up to buy Playtech’s business-to-business unit separately, according to analysts from Jarden.

However, they add that this could be “a long shot”, given competition also exists for Playtech from other suitors, including Gopher Investments, which has signalled it wanted to make another bid for Playtech after withdrawing an earlier offer, and JKO Play.

Jarden had earlier valued the B2B business, which consists of a mixture of casino, online sports and bingo betting software, at $2.7bn and it comprises about 40 per cent of Playtech’s earnings.

Playtech shareholders holding 28 per cent of the stock and led by the company’s former Hong Kong-based boss Tom Hall blocked Aristocrat’s earlier $3.9bn bid by voting against the transaction and leaving it unable to secure 75 per cent shareholder approval.

The collapse in its proposal was largely expected, with shares trading below its 680p offer price in recent days.

One possibility is that the shareholders objected to Aristocrat’s intention to retreat from unregulated markets, which included countries in Asia.

“A potential positive outcome is an opportunity for Aristocrat to bid for the B2B business, which would be subject to Playtech shareholder approval and not subject to the City Code on Takeovers and Mergers,” Jarden analyst Ben Brownette said in a research note.

There is a 50 per cent shareholder approval threshold for an ordinary resolution.

Playtech has announced it has provided consent to Gopher Investments, which previously indicated an intention to bid to waive the six-month condition on making a fresh bid, potentially putting the company back in play, he said.

 

Aristocrat will now shift its focus to alternative online real money gambling scaling options, which could include smaller mergers and acquisitions and potentially an increase in spend to grow the business organically.

“It now has the financial resources to be significantly more agile,” Jarden said.

“However, a one-stop-shop in the United States may take time, unless a large company looked at merging with Aristocrat, which we do not think should be out of the realms of possibility.”

Part of the appeal of Playtech for Aristocrat was gaining the exposure to real money gaming in North America, currently dominated by large groups such as DraftKings, MGM, Flutter and Entain.

Through Playtech, Aristocrat could export the technology into the United States and it would have been more of a turn key solution.

Jarden’s Mr Brownette said Aristocrat’s current trading sounded robust, backed up by industry data.

Aristocrat said it had entered into the 2022 financial year with excellent operational momentum.

He said Aristocrat now ran the risk of weakened returns on equity and invested capital until it found a meaningful acquisition or other use of funds.