Playtech Pays £460 Million for U.K. Trading Platform Plus500 

Plus500 Ltd. agreed to a $703 million bid from Playtech Plc, two weeks after the trading platform froze customer accounts, its stock plunged and short-sellers began circling. Playtech reserved the right to walk away if needed.

Playtech, an online gambling company that’s expanding into trading, said Monday it would pay 400 pence a share for Plus500, about 55 percent of its value a month ago. The deal can be scrapped if Plus500’s business falters, Mor Weizer, chief executive officer of Playtech, said on a call with investors.

The U.K. Financial Conduct Authority ordered Israel-based Plus500 to freeze the accounts in May as part of a review into anti-money-laundering controls that started in January. The company’s difficulties attracted firms like Valiant Capital Management betting on further declines, while billionaire Crispin Odey increased his stake after the shares plunged.

“We wanted to act quickly,” Weizer said on the call. “We see an opportunity. We believe that by combining the two, we will remedy the situation. There are certain scenarios defined in the agreement that for certain material adverse change affecting the business, the transaction basically becomes void.”

Plus500 jumped as much as 8.9 percent before erasing much of that gain after Weizer’s comments, while Douglas, Isle of Man-based Playtech pared a loss. Weizer said more details on the “adverse change” scenarios would be published in a forthcoming shareholder circular.

Plus500 was 0.9 percent higher at 373.25 pence as of 12:26 p.m. in London, giving the company a market value of 428 million pounds ($651 million). The bid is valued at about 460 million pounds. Playtech dropped 1.3 percent to 819.5 pence.

Due Diligence

Plus500 lost more than two-thirds of its value in the week of May 22. CEO Gal Haber said last week that the FCA found “major failings” in how the company collected documentation on its clients’ proof of residence and financial position.

Playtech recently acquired another online trading platform, TradeFX Ltd. Its approach for Plus500, whose systems allow retail customers to trade contracts for difference internationally, started a week ago after the firm said it was being probed by regulators, Weizer said.

“I know it’s only a week, but within this week we basically injected all possible resources into this project,” Weizer said in response to Simon Young, a fund manager at Aviva Plc who asked if that was long enough to carry out due diligence amid the regulatory scrutiny. “We managed to go through all relevant due diligence processes for us to feel comfortable that this is the right transaction for us,” Weizer said.

Regulatory Concern

Plus500 said last week that revenue this year is expected to be lower than in 2014, with margins “significantly lower” due to marketing costs. Revenue fell by an estimated $4 million at the company’s British business over the past two weeks, Plus500 said Wednesday. It’s also clearing a backlog of frozen accounts and improving compliance systems in a process costing about $2 million and estimated to take about a month.

Although it’s not possible to predict how Plus500’s talks with regulators will evolve, combining the two firms will help address their concerns, Weizer said.

“The recent regulatory scrutiny placed on Plus500 has highlighted it does not have the necessary infrastructure and expertise to support the complexity of the business at its size and rate of growth,” Weizer said. “We believe this can be remedied sooner rather than later.”

The takeover is estimated to be completed by the end of September, subject to regulatory approval. Playtech founder Teddy Sagi’s Brickington Trading, the largest shareholder with about 33.6 percent of the shares, will vote in favor of the takeover, according to the statement.

Crispin Odey’s Odey Asset Management said in a filing after the deal was announced that it boosted its voting rights in Plus500 to 21.33 percent from 19.6 percent. A spokeswoman for Odey had declined to comment before that filing was released.

Source: Bloomberg – Playtech Pays £460 Million for U.K. Trading Platform Plus500

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