23rd Nov 2015 15:51
LONDON (Alliance News) - Playtech PLC on Monday said it has terminated its agreement to acquire contracts-for-difference broker Plus500 Ltd over concerns it will not be able to secure UK Financial Conduct Authority approval before the end of 2015, and later confirmed that its purchase of Ava Trade also has fallen through.
The gambling software company agreed to buy Plus500 in a GBP459 million deal in early June as part of a series of deals to form its new Financials segment, starting with its acquisition of TradeFX Ltd in April and its separate deal to acquire Ava Trade EU Ltd for USD105 million. The deals for Plus500 and Ava Trade were expected to complete in September. However, both hit regulatory stumbling blocks.
The Central Bank of Ireland opposed the combination with Ava Trade, and Playtech confirmed Monday afternoon that it will continue to appeal the decision. The central bank's opposition had triggered a termination right for the sellers of Ava Trade. Playtech had early Monday warned that the sellers were yet to exercise that right, and later in the day confirmed that they have since terminated the deal. Playtech will lose its USD5.0 million deposit already paid on the signing of the acquisition but faces no other financial penalty.
Playtech's agreement to purchase Plus500 came after a troubled period for contracts-for-difference provider, which had been forced to suspend UK customer accounts amid concerns about its anti-money laundering processes. Plus500 also had to defend its accounting policies and confirm that it had paid its dividends. Whilst the deal was cleared by the Cyprus Securities and Exchange Commission, Playtech flagged several delays with the UK regulatory process, pushing back the expected completion date several times.
Just last Wednesday, the company suggested that it now expected the FCA's decision on the deal would come in December. Under the terms of the deal, it would be terminated should it not be completed by the end of 2015. However, Playtech said on Monday that following an update from the FCA late Friday afternoon, and having "considered its position over the weekend", it was now of the view that it will not be able to take steps to sufficiently satisfy the UK financial regulator and secure approval by the end of the year.
Playtech will not incur any financial penalties in relation to terminating the Plus500 deal. Playtech said it has no "immediate plans" in regards to its 9.9% stake in Plus500.
Both Playtech and Plus500 stressed the strength of their independent businesses in light of the collapse of the deal.
Playtech said it continues to enjoy double-digit underlying growth and a strong pipeline of opportunities providing it with confidence in "maintaining momentum". Additionally, it said it remains committed to growing the Financials division through both organic growth and acquisitions, but warned this vertical is unlikely to have "the scale of contribution" to the company in the near to medium term it had previously anticipated.
The company said it was considering its options in regards to its "significant cash balances" following the termination of the acquisition.
Nomura said the collapse of the Plus500 deal was "not totally unexpected", given the statements from Playtech highlighting delays in the UK approval process, and hints provided by the Plus500 share price, which has been trading at around a 10% discount to the offer price.
Plus500 outlined its plans for an independent future, proposing an interim dividend of USD0.2121 per share, and a share buyback programme.
Plus500 also stressed that its trading continues to be strong and re-confirmed its base dividend pay-out ratio of 60% of retained profits "in light of the positive trading". It has approved a share buyback programme of up to USD20 million of its shares, which will be funded from its available working capital.
The company reiterated that its revenue for 2015 as a whole will be ahead of 2014, but that profitability is still not expected to match 2014. Plus500 reported a net profit of USD102.5 million for 2014, on revenue of USD228.9 million.
"Following the agreement with Playtech that the merger between the companies will not proceed, we can confirm that our business is in good shape for a successful future as an independent company," said Plus500 Chief Executive Officer Gal Haber in a statement.
Shares in Playtech were down 8.9% at 776.00 pence late Monday afternoon, one of the biggest fallers in the FTSE 250, whilst Plus500 shares were down 7.3% at 332.50p.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews, with additional reporting by Samuel Agini; [email protected]; @samuelagini
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
Plus500Playtech