Ladbrokes plc (LSE: LAD) today announced that is creating a new, wholly owned, e-commerce and digital marketing services operation in Israel, as part of its new agreement with Playtech Cyprus Ltd. (LSE:PTEC). The Israeli operation will be integrated with the Ladbrokes' digital teams in London and Gibraltar, in order to fully benefit from Playtech's services.
"The Financial Times" reported, "Ladbrokes Israel, as the team will be called, will take on 40 marketing staff whose services have been bought by the gambling group for £850,000 from an Israeli company that works closely with Playtech."
At the same time Playtech, controlled by Teddy Sagi, today extended its software and technology agreements with Ladbrokes, and Playtech unit PTTS will also provide Ladbrokes with advisory services for its Ladbrokes Digital business. Playtech currently provides Ladbrokes, Britain's second largest gambling company, with online bingo and Videobet, will now also supply its full technology and product suite. The agreement, for an initial period of more than five years, will commence with the launch of a new 'Vegas' tab on Ladbrokes' digital platforms, offering a suite of casino and games products across online, mobile and tablet, with the other products to follow in due course.
The agreements come one week after Playtech sold its stake in William Hill Online to William Hill plc (LSE: WHM) for £424 million. The timing of the new Ladbrokes deal was made possible by Playtech's sale of its stake in William Hill Online. Under the terms of the joint venture with William Hill, Playtech could not sign a similar agreement with its rival, Ladbrokes.
Ladbrokes' digital business has not been as successful as William Hill Online, and it wants to use Playtech to improve its online operations. There is a strong probability that the deal will be very beneficial to Playtech's revenue. Ladbrokes will pay Playtech royalties for the use of its software, which could total tens of millions of euros a year equal to Playtech's royalties from William Hill, one of Playtech's three biggest customers.
Playtech will also be eligible to success fees from the advisory services provided by PTTS, based upon the improved performance of the Ladbrokes Digital's business over and above the base earnings before interest, taxes, depreciation and amortization (EBITDA) in 2012. The success fee is payable based upon the results achieved in 2017, with interim installments falling due if the base EBITDA is increased by £35 million, £70 million and £100 million in an earlier year. 75% of the success fee is payable in cash, with the balance payable in Ladbrokes shares. Playtech can elect to receive a greater proportion of the success fee in Ladbrokes shares.
Published by Globes [online], Israel business news - www.globes-online.com - on March 11, 2013
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