4th Jun 2015 09:26
LONDON (Alliance News) - Odey Asset Management LLP on Thursday said it does not intend to vote in favour of the 400 pence per share bid made for contracts-for-difference trading platform Plus500 Ltd by FTSE 250-listed gaming technology company Playtech PLC, saying the bid "materially undervalues" Plus500.
London-based hedge fund Odey, which on Tuesday increased its stake in Plus500 to 25.49%, having been steadily building up its stake in recent weeks, said Playtech's offer is "an opportunistic bid exploiting current regulatory issues and risks" and said it intends to vote against it.
"Even considering the current regulatory issues and near-term risks, we believe the intrinsic value of the business on a longer term view is materially higher than 400 pence," Odey said in a statement.
Odey added that while it understands that a cash acquisition of Plus500 makes sense for the company's management and staff, it believes the "current offer represents too great a discount compared to intrinsic valuation as a standalone entity" from the perspective of shareholders.
"Furthermore, we believe that the financial and strategic value of Plus500 to an industry bidder is significantly higher than valuation as a standalone entity," Odey added.
It also said it is in favour of the approach Plus500 management has taken to Playtech's bid in opening the door for other companies to run the rule over its business and potentially make rival offers.
Shares in Plus500 were up 0.6% at 372.03 pence on Thursday, while Playtech shares were down 0.7% to 822.00p.
Playtech reached an agreement to buy Plus500 on Monday for GBP459.6 million, coming after a torrid month for Plus500 in which it was forced to suspend UK customer accounts amid concerns about its anti-money laundering processes, defend its accounting policies and to confirm that it had paid its dividends.
Plus500 confirmed during the month that the UK's Financial Conduct Authority required it to verify its customers in the UK and ask them for documentation in doing so. It also had to defend its accounting policies during the month, after it became a target for short-sellers who have questioned both its business practices and accounting. Also during May, the company had to confirm it had paid its final and special dividend following market speculation it had not done so, another contributor to its share price fall.
Commenting on the accounting policies in late May, the company said it was "aware of recent press and blog commentary regarding Plus500's accounting policies and business model and rejects the assertions made as misrepresentative and baseless."
"In response to the specific issue raised in respect of the restatement of Plus500 UK's subsidiary accounts and the implication that group revenue is substantially over-stated or a substantial amount is generated in unlicensed jurisdictions, we clarify that both assertions are incorrect," it added.
In the same update, however, Plus500 conceded that the suspension of customer accounts in the UK had hit revenue from that operating business, with UK revenue falling by around USD4 million in the final fortnight of May. Overall revenue in the group's second quarter was down to USD25.8 million from USD45.5 million a year earlier, though the group cautioned against extrapolating from those figures given the volatility it can see in quarterly periods. It also said revenue in 2015 to May 25 was higher year-on-year.
Playtech, which provides software and services for the gaming industry but which has recently made a foray into the financial sector with the acquisition of TradeFX, an online contracts-for-difference and binary options broker and trading platform provider, said on Monday that Plus500 was a natural fit for its new strategy to aggregate businesses in the online trading sector and said it would add scale to the TradeFX business.
"Having recently completed the acquisition of TradeFX, the opportunity to acquire Plus500 will prove transformational for our ambitions to expand Playtech's wider offering. As an immediately earnings enhancing acquisition, the combination of the two businesses is compelling, enabling us to apply our market-leading products and services to the enlarged financial trading business as we continue to execute our growth strategy for the group," said Playtech Chief Executive Mor Weizer said on Monday.
Numis analyst Jonathan Goslin, commenting on the deal on Monday, said the offer does look good for Plus500 shareholders, given the ongoing uncertainty caused by the FCA probe, the proportion of clients that can ultimately be verified, and the potential reputational damage the group may be facing.
By Sam Unsted; [email protected]; @SamUAtAlliance
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