Playtech: A gamble that paid off

The analysts' consensus is that Playtech will make £409 million on the sale of its 29% stake in William Hill Online.

When Playtech Cyprus Ltd. (LSE:PTEC) CEO Moran Weizer, 37, was appointed to his post, his predecessor, Avigur Zmora called him aside, and said, "Moran, you have a name problem. You'll probably have to change it. Moran sounds too much like moron. You can't let investors call you that." Moran listened and applied the advice, and has been known as Mor since taking the job six years ago, at least to Playtech's investors and customers. Controlling shareholder Teddy Sagi still calls him Moran.

Weizer, besides Sagi, is the man who is responsible for the success of Playtech, the world's leading software vendor for online gaming, and one of the great successes of Israeli high tech of the past decade. Playtech, which floated on London’s Alternative Investment Market (AIM) in March 2006, now has a market cap of £1.6 billion, more than double its value at the IPO, and it is now listed on the London Stock Exchange's main market.

Playtech has 2,500 employees worldwide, including in the UK, the Isle of Man (the tax haven where it is incorporated) Ukraine, Latvia, Bulgaria, Sweden, Estonia, and the Philippines. "The reason is simple," Weizer told "Globes" in an exclusive interview. "Manpower in these countries is readily available, and it is very - cheap much cheaper than Israel. This is why we have many fewer employees in Israel, only about 200."

Playtech provides the systems that online gaming companies need to operate their websites, from billing systems, player monitoring and analysis systems, and marketing solutions for a wide range of games, including roulette, bingo, lotto, and sports betting. The company has solutions for computers, smartphones, standard games of chance machines, and television. Playtech is found in every corner of the betting industry,

Playtech's success is partly based on acquisitions since it went public. It has acquired ten companies to date, some of them Sagi's private companies, to create a company with a gross income of €368.1 million in 2012. In the first half of 2012, the company posted a net profit of €84.6 million, and analysts forecast a full-year net profit of €148.6 million.

One of Playtech's most successful acquisitions, and one which indicates where the online gaming industry is headed, is Mobenga, which was acquired for a few a million dollars. Playtech says that Mobenga, which offers a mobile sports betting solution, is outperforming expectations. "Within three years, more than half of Playtech's activity will be via smartphones," says Weizer. "Mobile is another channel for me to reach players. For me, mobile and PCs are the same thing. A player who goes online via a mobile device or a PC ends up at the same poker table. Only the user experience is different."

Weizer adds, "In general, sports are an excellent way to reach new players. 80% of casino and poker players come from sports bets. Sports betters are less loyal to a site than casino and poker players, so it's cheaper to acquire them. 65% of the online betting industry's profits come from casino and poker games, and 35% from sports bets. This means that I can buy a new casino or poker player cheaply, and make a bigger profit on him."

Weizer has no intention of foregoing social games either. Last year, Playtech almost acquired Sagi's social gaming company for $125 million, but withdrew the offer under heavy criticism from investors about the company's many parties at interest deals with Sagi. Weizer says, however, that Playtech can meet the social games market demand. "It's a huge market, and we have several deals in the pipeline," he says.

Selling William Hill Online for £409 million

Playtech is due to sell its 29% minority stake in William Hill Online, its joint venture with William Hill plc (LSE: WMH), one of Britain's largest betting companies. They founded the venture four years ago, and it quickly became a goose that lays golden eggs. The initially convivial relations between the partners frayed, and William Hill decided to exercise its option to buy out Playtech. Under the sale agreement, each party commissioned an independent valuation for William Hill Online, but because of the wide difference in the valuations, an investment bank is making a third, independent, valuation.

The sale of William Hill Online is due to close soon. The analysts' consensus is that Playtech will make £409 million on the sale of its stake, a huge sum for the company which underscores the venture's success. The venture is based on activity that Playtech acquired from Sagi for $250 million.

"We are not disappointed by the pending sale of William Hill Online," says Weizer. "It's the right thing to do for all the parties involved. William Hill Online is a huge success, and the time has come to split."

Playtech will have three options after selling its stake in the venture: distribute a special, higher than usual, dividend; initiate a share buy-back; or invest a substantial part of the proceeds back into the company.

Published by Globes [online], Israel business news - www.globes-online.com - on February 28, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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