Playtech to consider Gopher’s bid as shareholders reject Finalto sale

Playtech has agreed in May with a Barinboim Group-led consortium to acquire the London-listed firm’s financial trading arm.

But Playtech shareholders have seemingly argued the offer undervalued the business and rejected the deal at a special meeting on Wednesday. Namely, 68.3% of votes cast were against a potential transaction involving the sale of Finalto (formerly TradeTech).

As a result, Playtech has terminated its share purchase agreement (SPA) with the consortium led by Israel’s Barinboim Group. In an attempt to break the deadlock, the company is engaging in negotiations with its major shareholder Gopher Investments  regarding a proposal already on the table to acquire the business.

“The Company announces that, at the General Meeting held earlier today, the resolution to approve the disposal of Finalto to the Consortium was not passed.  Due to the resolution not having been passed, the Consortium has agreed with Playtech to immediately terminate the SPA.  As a result, the restrictions on Playtech from engaging with Gopher are no longer in place. The Company will now seek to engage with Gopher to progress a disposal of Finalto. Although the Consortium has agreed to terminate the SPA, it has indicated to Playtech it intends to maintain the Consortium for the next 30 days, such that it will be in a position to re-enter into the SPA if the parties so agree,” Playtech said in a filing with London Stock Exchange.

Gopher Investments, which holds a 4.97% stake in the gambling-technology provider, proposed to pay $250 million to acquire the unit. The business also offered last month to pay a break fee of $10 million to Playtech if the board changed its recommendation away from the consortium, but was nevertheless rejected.

Playtech raised questions with Gopher as part of its due diligence into the sweetened offer, adding that the bid is uncertain because it is non-binding and subject to a number of conditions. Based on this assumption, the FTSE 250-listed group didn’t change its recommendation, particularly as it didn’t receive interest in Finalto from other potential acquiring parties.

At the time, the consortium led by Israeli investors issued a statement that said: “Shareholders should ask why Gopher continues to hide and should also be suspicious of Gopher’s credibility, particularly given that disclosure is crucial when buying a highly regulated business.”

To sweeten their offer, the group has floated the idea of considering a management buyout (MBO) route, whereby Finalto managers will lead the takeover transaction and acquire around 10 percent of their company. Most obviously, this would allow for a smooth transition of ownership and would likely shorten the due diligence process as the buyers already have full knowledge of the company.

Playtech’s trading technology division has become a lucrative target this year as increased market volatility, led by Covid-19 chaos, boosted revenue. However, before that Playtech trimmed its profit guidance due to highly challenging trading conditions and a regulatory crackdown on risky trading products.

Finalto’s business includes TradeTech Alpha, created to deliver a B2B solution, Markets.com, a provider of CFD and FX trading to retail investors, and MarketsX, a dedicated B2C brand for high-net worth clients. Furthermore, it includes CFH Group, which Playtech acquired in 2016 in a $120 million deal.

Concluding its statement, Playtech said its strategy remains to simplify its business by selling Finalto for the maximum available proceeds.