Playtech says CFH performs well, hints at further M&A in Financials division

Maria Nikolova

Playtech said that CFH continues with solid performance after its November acquisition but did not provide any numbers, nor more details on the price to be paid for CFH.

The announcement about the purchase of CFH Group by Playtech PLC (LON:PTEC) in November 2016 made a media splash, mostly because of the somewhat complex structuring of the acquisition which resulted in a lack of clarity regarding the actual price to be paid for CFH. We had been expecting to have more details on that today, as Playtech posted a brief AGM Trading Statement but, unfortunately, the filing with the LSE did not provide more substantial information on the deal.

Nevertheless, there are at least two takeaways from today’s announcement:

  • CFH Group continues to perform well after the November acquisition;
  • Playtech keeps discussing further acquisitions in the Financials division.

According to Playtech’s annual report for 2016, €1.8 million of new revenue has been contributed to its consolidated accounts for 2016 after CFH’s acquisition was completed.

Here is what the annual report said of the CFH deal:

“The Group paid total cash consideration of €38.6 million ($41.0 million). The company will pay €0.3 million ($0.3 million) as additional working capital adjustment in the beginning of 2017.

The Group has a call option to purchase the remaining 30% of CFH at a valuation of 6 times 2018 EBITDA capped at a total consideration of $76.6 million less the initial consideration. The founder and CEO of CFH have certain put options over his 30% holding at the same valuation. The fair value of this option was recognised as a non current liability and reflected in the Groups’ statement of changes in equity. The fair value as of 31 December 2016 was €16.9 million.”

Importantly, there was no mention of the $120 million figure for CFH’s acquisition in the annual report.

This is in tune with FinanceFeeds’ view that it is not 100% certain that Playtech will eventually pay as much as $120 million for CFH. As FinanceFeeds has noted in its analysis, its is more important to consider the details of how the deal is structured than the numbers themselves.

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