Topping hails transformational Playtech deal 20/10/2008

Jake Pollard

William Hill chief executive Ralph Topping hailed the agreement with Playtech as “transformational” and said the two firms' product suites complemented each other strongly.

Playtech has signed an initial five-year agreement with William Hill to supply the UK bookmaker with its online casino and poker solutions and the acquisition of affiliate and marketing companies Uniplay International and Six Digits Trading from Playtech founder Teddy Sagi for a total consideration of £144.5m (US$250m).

Playtech will transfer the purchased assets immediately to William Hill Online (WHO), the newly-set up online division for William Hill, in return for a 29% stake in the firm. Henry Birch, former chief executive of Gaming & Leisure, has been appointed chief executive of the new Hill’s entity.

William Hill will be able to buy out Playtech’s interest after four and six years while Playtech will be allowed to increase its stake in WHO to 32% of the company, depending on certain conditions relating to the integration being met. The agreement costs will come to £24m, for capital expenditure, transaction and integration costs, William Hill said.

Speaking at an analyst presentation yesterday morning, Topping said the agreement with Playtech was “transformational” and complementary for both firms.

Topping said: “In common with the rest of the betting industry, retail has been struggling and online gaming will be a strong driver of growth in the future. Our online gaming offering previously wasn’t good enough. We provide a recognised and trusted brand in sports betting and Playtech has a very strong brand in online poker and casino; this is why the two firms complement each other so well. In addition, William Hill’s client base is very UK-focused, while Playtech generates 92% of its revenues from non-UK customers.”

Asked how Playtech’s current licensees felt about the company entering into such an agreement with one of their key competitors, Avigur Zmora, non-executive director of Playtech, said: “We worked very hard to make sure we structured this deal in such a way that we take a passive role as a shareholder (in William hill Online).

"At first we were pitching for a software licence and Ralph Topping said: “It’s not what I’m looking for, I want to change my business. How can you help?” It came at the right time for us. Since it’s a passive investment, we believe that we will be able to do as we have done so far and provide the same level of service to all our licensees going forward. I won’t say our licensees are necessarily in love with this transaction, but I’m sure everybody will understand that we will have a huge upside as far as financials are concerned.”

Uniplay and Six Digits generated profits of £5.8m for the full year 2007 and in the six months to the end of June had combined revenues of £26m and net earnings of £5.3m. Playtech said the net earnings were growing rapidly and the current annualised run rate for both companies was set at around £18m.

The Playtech involvement in WHO will be passive, the firm will have no operational involvement and will not sit on its board. William Hill’s estimate for its online operations for 2008 is of net revenues of £190m and earnings before interest, tax and amortisation of £75m.

William Hill’s current contract with CryptoLogic for its poker and casino platform is due to run out at the start of 2010 and the company will offer both CryptoLogic and Playtech platforms throughout 2009 before being supplied exclusively by Playtech from 2010.

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Posted: 20/10/2008