European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<p><a href="https://www.smartkarma.com/entities/playtech-plc" target="_blank" data-smartkarma-citation="entities:22099:1" rel="noopener">Playtech Plc (PTEC LN)</a>'s shareholders have won big time at the casino table. On late Sunday 17 October, Playtech, a FTSE 250 white label gambling-technology company, said that it has agreed to a <span title="Share Price as of Oct-15-2021 FY: 2021 Period End Date: Jun-30-2021 Period Type: LTM Value: £ 4.29, Currency: GBP">£</span>2.1 billion takeover from Australian slot machine manufacturer <a href="https://www.smartkarma.com/entities/aristocrat-leisure-ltd" target="_blank" data-smartkarma-citation="entities:10303:1" rel="noopener">Aristocrat Leisure (ALL AU)</a> through its subsidiary Aristocrat (UK) Holdings Ltd. The acquisition is to be effected by means of a scheme of arrangement under Part X of the Isle of Man Companies Act 2006. Aristocrat's offer is its fourth bid, but the first one to be made public.</p>
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<p>Under the offer, accepting shareholders of Playtech will get <strong>680p/share in cash</strong>, cum dividend, a <strong>58% premium</strong> to the closing price of 429.20p on Friday 15 October.</p>
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<p>The offer puts an enterprise value on Playtech of <span title="Share Price as of Oct-15-2021 FY: 2021 Period End Date: Jun-30-2021 Period Type: LTM Value: £ 4.29, Currency: GBP">£</span>2.7 billion. <strong>Gambling companies are rushing to profit off the deregulated gambling market in the USA</strong>, which is forecast to become one of the biggest betting and gaming markets in the world. The USA online gambling market was valued at USD 2,178 million in 2020, and it is estimated to have a CAGR of 17.34% during the period 2021-2026 (source: Mordor Intelligence). Online betting is expected to be the fastest-growing segment during 2021-2026. Software providers are embarking on M&amp;A to achieve consolidation and optimise their product portfolio. See <a href="https://www.smartkarma.com/insights/mgm-s-prospective-offer-for-entain" target="_blank" data-smartkarma-citation="insights:46752" rel="noopener">MGM's Prospective Offer for Entain</a> and <a href="https://www.smartkarma.com/insights/enlabs-entain-raised-offer" target="_blank" data-smartkarma-citation="insights:48838" rel="noopener">Enlabs - Entain: Raised Offer</a> and <a href="https://www.smartkarma.com/insights/draftkings-entain-cash-and-shares-approach" target="_blank" data-smartkarma-citation="insights:57963" rel="noopener">DraftKings/Entain: Cash and Shares Approach</a>. The <strong>Americas are driving the growth of Playtech</strong>.</p>
<p>The deal should allow Aristocrat to gain scale and increase offering in both Aristocrat’s casino business and the online sports betting market in the USA, where Playtech has recently expanded in response to more relaxed rules allowing online gambling and sports betting. Aristocrat expects to realise additional EPS in the high single digits in the first year after purchase.</p>
<p>Playtech's est. WACC is 9.2% vs a LTM ROIC of 4.6%. This means that the company destroys value as it grows. Aristocrat est. WACC is 9.6% vs. a LTM ROIC of 4.5%. Like Playtech, it destroys value as it grows. This may be the reason why Aristocrat is seeking scale.</p>
<p>I value Playtech using a SOTP model (gaming business valued at sector multiples and Financials business in line with financial trading peers and call options related to Latin America structured agreements at book value). <strong>My estimate of fair value is 590p</strong>.</p>
<p>Paraphrasing the Chairman of Playtech, the deal provides an attractive opportunity for shareholders to cash the chips. This is a <strong>done deal</strong>, as shareholders are highly likely to approve it, in my view. <strong>Gross spread is just 0.4%</strong>. I would <strong>wait for share price weakness before establishing a position</strong>.</p>
<p>Playtech was in the process of streamlining and divesting poor performing divisions (Finalto), thus becoming more attractive and the latest London-listed gambling company to be targeted for a takeover, as operators rush to build scale and break into the USA. 2021 has seen the takeover of <a href="https://www.smartkarma.com/entities/william-hill-plc" target="_blank" data-smartkarma-citation="entities:22210:1" rel="noopener">William Hill (WMH LN)</a> (<a href="https://www.smartkarma.com/insights/william-hill-caesars-almost-done-deal-trading-above-terms" target="_blank" data-smartkarma-citation="insights:43809" rel="noopener">William Hill - Caesars (Almost) Done Deal, Trading Above Terms</a>), and two attempts on <a href="https://www.smartkarma.com/entities/entain-plc" target="_blank" data-smartkarma-citation="entities:23926:1" rel="noopener">Entain (ENT LN)</a>.</p>

Playtech Plc (PTEC LN)'s shareholders have won big time at the casino table. On late Sunday 17 October, Playtech, a FTSE 250 white label gambling-technology company, said that it has agreed to a £2.1 billion takeover from Australian slot machine manufacturer Aristocrat Leisure (ALL AU) through its subsidiary Aristocrat (UK) Holdings Ltd. The acquisition is to be effected by means of a scheme of arrangement under Part X of the Isle of Man Companies Act 2006. Aristocrat's offer is its fourth bid, but the first one to be made public.

Under the offer, accepting shareholders of Playtech will get 680p/share in cash, cum dividend, a 58% premium to the closing price of 429.20p on Friday 15 October.

The offer puts an enterprise value on Playtech of £2.7 billion. Gambling companies are rushing to profit off the deregulated gambling market in the USA, which is forecast to become one of the biggest betting and gaming markets in the world. The USA online gambling market was valued at USD 2,178 million in 2020, and it is estimated to have a CAGR of 17.34% during the period 2021-2026 (source: Mordor Intelligence). Online betting is expected to be the fastest-growing segment during 2021-2026. Software providers are embarking on M&amp;A to achieve consolidation and optimise their product portfolio. See MGM's Prospective Offer for Entain and Enlabs - Entain: Raised Offer and DraftKings/Entain: Cash and Shares Approach. The Americas are driving the growth of Playtech.
The deal should allow Aristocrat to gain scale and increase offering in both Aristocrat’s casino business and the online sports betting market in the USA, where Playtech has recently expanded in response to more relaxed rules allowing online gambling and sports betting. Aristocrat expects to realise additional EPS in the high single digits in the first year after purchase.
Playtech's est. WACC is 9.2% vs a LTM ROIC of 4.6%. This means that the company destroys value as it grows. Aristocrat est. WACC is 9.6% vs. a LTM ROIC of 4.5%. Like Playtech, it destroys value as it grows. This may be the reason why Aristocrat is seeking scale.
I value Playtech using a SOTP model (gaming business valued at sector multiples and Financials business in line with financial trading peers and call options related to Latin America structured agreements at book value). My estimate of fair value is 590p.
Paraphrasing the Chairman of Playtech, the deal provides an attractive opportunity for shareholders to cash the chips. This is a done deal, as shareholders are highly likely to approve it, in my view. Gross spread is just 0.4%. I would wait for share price weakness before establishing a position.
Playtech was in the process of streamlining and divesting poor performing divisions (Finalto), thus becoming more attractive and the latest London-listed gambling company to be targeted for a takeover, as operators rush to build scale and break into the USA. 2021 has seen the takeover of William Hill (WMH LN) (William Hill - Caesars (Almost) Done Deal, Trading Above Terms), and two attempts on Entain (ENT LN).

Aristocrat/Playtech: Cashing in the Chips

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<p><a href="https://www.smartkarma.com/entities/aristocrat-leisure-ltd" target="_blank" data-smartkarma-citation="entities:10303:1" rel="noopener">Aristocrat Leisure (ALL AU)</a> aims to raise around US$1bn (A$1.3bn) via a renounceable entitlement offer to partly fund its acquisition of <a href="https://www.smartkarma.com/entities/playtech-plc" target="_blank" data-smartkarma-citation="entities:22099:1" rel="noopener">Playtech Plc (PTEC LN)</a> for a total enterprise value of around A$5bn.</p><p>Past deals undertaken by Aristocrat have generally done well and the stock has a good track record. In this note, we will talk about the deal dynamics and run the deal through our ECM framework.</p>

Aristocrat Leisure (ALL AU) aims to raise around US$1bn (A$1.3bn) via a renounceable entitlement offer to partly fund its acquisition of Playtech Plc (PTEC LN) for a total enterprise value of around A$5bn.Past deals undertaken by Aristocrat have generally done well and the stock has a good track record. In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Aristocrat Leisure's Playtech Acquisition, Entitlement and Shortfall

Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Equity Bottom-Up

Galaxy Entertainment Group / Equity Bottom-Up

<p>For our next Webinar, we are thrilled to welcome Insight Provider <a href="https://www.smartkarma.com/profiles/howard-j-klein" target="_blank" data-smartkarma-citation="accounts:1005" rel="noopener">Howard J Klein</a>. Howard will go over his outlook on the casino and gaming sector in Asia for 2022 and present opportunities for investors in this space.</p>
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<h3>The webinar will be hosted on Wednesday, 6 October 2021, 11:00 SGT/HKT.</h3>
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<h2><a href="https://share.hsforms.com/1H9pFZOB-RF2J00kbvMmxcw2c5gj?zoom_webinar_id=86290932330" target="_blank" rel="noopener">Register for the Webinar here</a></h2>
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<p>Howard J Klein has 25+ years of experience as a C-level executive of the casino industry in operations, marketing, international development, and strategic planning. He is currently a consultant specialising in the casino space, an industry expert contributor, and publisher of a subscription letter called "The House Edge". He gained extensive experience in marketing and development in the Asian gaming market while a senior executive at Caesars, Ballys Grand, and Trump Taj Mahal, and he was part of senior executive teams that valued acquisitions and mergers with companies in the casino, hotel, entertainment, and restaurant space.</p>
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For our next Webinar, we are thrilled to welcome Insight Provider Howard J Klein. Howard will go over his outlook on the casino and gaming sector in Asia for 2022 and present opportunities for investors in this space.

The webinar will be hosted on Wednesday, 6 October 2021, 11:00 SGT/HKT.




Register for the Webinar here

Howard J Klein has 25+ years of experience as a C-level executive of the casino industry in operations, marketing, international development, and strategic planning. He is currently a consultant specialising in the casino space, an industry expert contributor, and publisher of a subscription letter called "The House Edge". He gained extensive experience in marketing and development in the Asian gaming market while a senior executive at Caesars, Ballys Grand, and Trump Taj Mahal, and he was part of senior executive teams that valued acquisitions and mergers with companies in the casino, hotel, entertainment, and restaurant space.



Smartkarma Webinar | Asian Casino Outlook 2022: Challenges and Opportunities

Global Gaming and Casinos Industry Specialist, Casino Business Review LLC

Howard J Klein

Global Gaming and Casinos Industry Specialist

<ul>
<li>Australia-based Aristocrat's business segment are diverse in slot machines, monitoring systems, digital social gaming. They are now also an earl mover in cashless gaming. Its fully valued, but still a buy.</li>
<li>2019 baseline results show pre-pandemic growth strong at home, in the US and Asia. 2020 showed tolerable decline under adverse conditions globally.</li>
<li>Its net earnings growth over 5 years averages 17.4% reflects a management that executes a long term strategy that is deserving of a higher valuation.</li>
</ul>


Australia-based Aristocrat's business segment are diverse in slot machines, monitoring systems, digital social gaming. They are now also an earl mover in cashless gaming. Its fully valued, but still a buy.
2019 baseline results show pre-pandemic growth strong at home, in the US and Asia. 2020 showed tolerable decline under adverse conditions globally.
Its net earnings growth over 5 years averages 17.4% reflects a management that executes a long term strategy that is deserving of a higher valuation.


Aristocrat Leisure Ltd: A Top Gaming Equipment Maker Poised for a Post-Pandemic Resumption Growth

<ul>
<li>Australia's big gaming tech maker spurs organic growth with its entry into the digital gaming space.</li>
<li>A balance of a strong international footprint and big US presence in the casino sector show up in dramatic forward earnings estimates by analysts.</li>
<li>Sharp decline in entire gaming sector since last summer has kept the ARISTOCRAT story below the radar.</li>
</ul>


Australia's big gaming tech maker spurs organic growth with its entry into the digital gaming space.
A balance of a strong international footprint and big US presence in the casino sector show up in dramatic forward earnings estimates by analysts.
Sharp decline in entire gaming sector since last summer has kept the ARISTOCRAT story below the radar.


Aristocrat Leisure Ltd near 52 Week Low Has Runway Based on Positive Earnings Outlook Through 2021

Australia

Aristocrat Leisure Limited manufactures and sells gaming machines in Australia and internationally.  The Company also supplies gaming systems, software, table gaming equipment and other gaming related products and services to casinos, clubs and hotels.

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Aristocrat Leisure (ALL AU)

Aristocrat/Playtech: Cashing in the Chips

Shareholders are highly likely to cash in the chips, in my view. Gross spread is just 0.4%. Wait for share price weakness. London-listed gambling...

Jesus Rodriguez Aguilar

Aristocrat Leisure's Playtech Acquisition, Entitlement and Shortfall

Aristocrat Leisure (ALL AU) aims to raise around US$1bn via a renounceable entitlement offer to partly fund its acquisition of Playtech Plc (PTEC...

Sumeet Singh

Smartkarma Webinar | Asian Casino Outlook 2022: Challenges and Opportunities

On 6 October, 11am SGT, join us as Howard J Klein goes over his outlook on the casino and gaming sector in Asia for 2022 and presents opportunities...

Smartkarma Research

Aristocrat Leisure Ltd: A Top Gaming Equipment Maker Poised for a Post-Pandemic Resumption Growth

Though fully valued at the moment, we believe ALL's historically strong performance gives the stock run room as we enter late stages of the pandemic.

Howard J Klein

Aristocrat Leisure Ltd near 52 Week Low Has Runway Based on Positive Earnings Outlook Through 2021

Australia's big gaming tech maker spurs organic growth with its entry into the digital gaming space. A balance of a strong international footprint...

Howard J Klein

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