Playtech confirms it has been approached over the sale of Finalto

Darren Sinden

Finalto was described by the company as Playtech’s outstanding performer in H1 2020

Gaming and trading conglomerate Playtech has confirmed that it has been approached by a potential buyer for its Finalto division.

The business, which has been up for sale for some time, provides liquidity, clearing, technology and associated support services for FX and margin trading brokers.

The potential buyers are a consortium of Israeli businesses, including two insurance companies, including Phoenix Insurance, based in Givatayim which is one of Israel’s largest insurers, Leumi Partners Ltd which is the VC division of Bank Leumi, Israel’s longest established and largest bank.

Playtech built Finalto, formerly known as Tradetech, through acquisition, hoping to replicate the success it had had in the world of online gambling.

Yet it never really looked or felt like a comfortable owner of a financial service business albeit one that is mainly in the B2B space. Although Finalto does contain a consumer-facing operation in the form of Markets.com.

In a trading update issued two weeks ago, Playtech said that Finalto had had a very strong 2020 driven by exceptional performance in the first half of the year followed by challenging second half.

Though the company did not expand on what the challenges seen in H2 2020 were. Finalto was described by the company as Playtech’s outstanding performer in H1 2020.

According to Playtech’s results for the six months to the end of June 2020, that were published in September.

Finalto generated revenues of €87.30 million, a figure that was 123% higher than the comparable numbers in 2019. Whilst its adjusted EBITDA grew by 544% at €52.80 million, compared to €8.20 million generated in H1 2019.

Playtech confirmed yesterday that it had been approached by a consortium that is interested in buying Finalto for up to US$200.0 million in cash.

Though for that money the consortia would secure $110.0 million of regulatory capital necessary to run the business. Those numbers effectively value the equity and goodwill in the business at a maximum of $90.0 million.

Without knowing more about the challenges that Finalto faced in the second half of last year and whether they have been successfully resolved or continue to present an issue to the business, it is hard to decide if this offer represents good value. Though in the absence of any other competing offers that may be an academic point.

Has Playtech considered spinning the business out, by perhaps reversing it into a SPAC or cash shell which is proving so popular in US markets at the moment, or could that be what the consortia have in mind for the business long term?

Any deal will, of course, require regulatory approval for the change of control of three regulated businesses and this will likely be the first piece of M&A that the UK’s financial regulators oversee, post-Brexit. As such it will be an interesting test case, should the initial approach that has been made to Playtech, move forward to a formal deal.

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