Earnings+More - E+M Deal Talk - August
E+M Deal Talk - AugustPlaytech’s M&A woes, a look at PlayUp’s strategic review and some thoughts on share buybacks.Welcome to the debut edition of E+M’s new monthly newsletter Deal Talk, discussing what’s being spoken about away from the earnings announcements and analyst calls of the betting and gaming sector. Much of this, as you will see, is off the record. Necessarily so, because the best info often comes in non-attributable comments and for a very good reason. Much of the gossip is provisional, the ideas discussed are often just that - ideas. None of this is set in stone. In terms of usefulness, we think this information has a place. It broadens the understanding of what’s going on in the sector and provides insight into what has been said by companies operating within the space. We trust you find this issue a decent read and look out for further issues that will be in your inboxes every second Tuesday of every month. If you were forwarded this email and would like to subscribe to the Earnings+More newsletter, click below: Playtech’s M&A woesPlaytech’s rolling maul of an M&A saga, begun back in October last year when Aristocrat first lodged a £2.7bn bid for the online gaming and betting supplier, appeared to reach a dead-end in mid-July when it was announced that the TTB investor group would not be lodging a formal offer for the company. But is that really the end of the road? The TTB group included, of course, Mor Weizer, the current Playtech CEO, along with Tom Hall, a former CEO and current investor.
The big chill: The escalating price of debt points to a central point: credit markets have frozen.
Collateral damage: Inevitably, the same debt backdrop also did for the hopes of the CaliPlay float deal involving Playtech, Caliente and the Tekkorp SPAC. At the end of July, Playtech said the original plan for a float had been abandoned due to capital market conditions which had “deteriorated significantly”.
Not just a debt storyThe Asian connection: Ancillary to the debt story for any Playtech suitor is the status of a group of Asia-based investors who, according to the shareholder register, control over 20% of the shares.
Slippery people: The grouping is controversial, not least because it is so hard to pin down. According to the stock exchange rules, they are not acting as a concert party but it is known they were - collectively - the holdouts on the original Aristocrat bid.
You can go your own way: Whoever the owners are, it is thought they wouldn’t be keen on the Asian business being cast adrift by any sale from the Playtech tech.
Boxed inStuck: The Asian shareholders have the power to block any deal they don’t like (Aristocrat is thought unlikely to return to the table on this basis) but have yet to articulate what they do want.
Where do we go from here? “It’s like the old gag about not starting from here,” says one source. A deal would have to be attractive enough to entice the Asian investors to sell but that would necessarily mean taking on the Asian risk.
The month in transactions
PlayUp’s strategic reviewFor a small company, PlayUp generates a lot of news. The latest surrounds the appointment of Innovation Capital to undertake a strategic review. The future is far from written: If it is better overall to be talked about than not, PlayUp is doing well. The news that the Australian-based company is now seeking advice on what to do next comes after a run of stories, some good, some not so much, all of which suggest a company in flux.
Key/unlock: As with any strategic review, the aim is to explore how to unlock shareholder value, as bankers and advisers tend to put it. Which in plain language means to find a buyer. What’s on offer? PlayUp operates in Australia on its own tech platform. However, its US positioning is arguably what makes a sale attractive, and is the reason why a buyer has yet to be sourced.
Fantasy channels: Another plus point is the company’s DFS operation in Australia, DraftStars which is the number one in that market and comes with the potential of combining prize pools with a US audience. Who will buy?The most obvious buyer - but clearly not biting as it stands - is FTX. As was revealed via the Mintas court papers, it was on the verge of buying the entire business last year for $450m.
A crypto JP Morgan: Away from the sports-betting bubble, it should be noted that FTX rather has its hands full at present. In the midst of the recent crypto slump, not to say crisis, it became something of a buyer of last resort for all manner of crypto casualties.
Deeper dive - MGM’s share buybacks
Health and efficiency: The strength of MGM’s balance sheet is demonstrated by its share buyback program which has to date this year snapped up over 32m shares. On the call on Wednesday, CFO Jonathan Hlakyard said the “aggressive” repurchase program had been embarked upon because of the “value we see at current trading multiples”.
Eye of the beholder: Halkyard offered what he said was a ”soliloquy” about the attractiveness of MGM’s share price value, he added that share buybacks were also a part of the asset-light strategy the company has been pursuing of returning capital to shareholders.
More reviewsThe pressure cooker: Another strategic review was announced last week when FuboTV said it was looking at its options when it came to its gaming division. The US TV streaming challenger announced on Friday it is “looking for a new partner” for the business.
Join the queue: Alongside the aforementioned PlayUp review, sources suggest BetFred and Tipico are also thought to be casting around for options whether that is a buyout, partnerships or other changes in direction. On socialA take on share buybacks: @earnings_and @PENNEntertain @BallysCorp A corporate name change is like buying back shares - empty calories on an earnings call because you have no good news. $PENN Contact us
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