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 Real Casinos2012 - Real Casinos News Archive> Acquisition of Ash Gaming Limited ('Ash Gaming')

Playtech, (AIM: PTEC) the international designer, developer and licensor of software and services for the online, mobile and land-based gaming industry, announces that it has acquired the entire issued share capital of Ash Gaming, one of the leading developers of interactive gambling and betting games.

In summary:

· Acquisition of recognised industry-leading content provider, with more than 30 licensees

· Total cash consideration of up to £23 million, comprising initial consideration of £15.5 million and deferred contingent consideration of up to £7.5 million

· Strong revenue and EBITDA growth profile with accelerating run-rate; implies run-rate EBITDA multiple of 6.4xbased on pro forma annualised performance of the 3 months to 31 October 2011

· Enhances Playtech's wholly-owned content library and value chain economics

· Complements Playtech's technology leadership with additional premier content capability

· Potential for revenue synergies, incremental opportunities and uplift in margins for casino/games platform as well as poker and bingo side games

Ash Gaming

Ash Gaming was founded in 2002 and is now one of the online gaming industry's leading games content developers focused on the provision of games for online betting and gambling operators, predominantly developing slot-based games. The Company employs more than 40 staff, of which the majority are game developers.

Ash Gaming delivers sophisticated slot machines, fixed odds games and content in the area of virtual races. It has won a number of industry accolades and was Highly Commended for 'Innovation in Slot Production' in 2010 by E-Gaming Review. Its leading game titles include Amazon Wild and Madness House of Fun and are distributed through platforms as well as direct to certain operators, principally under revenue share agreements.

Key customers include many of the most popular online sportsbooks. The audited accounts for Ash Gaming recorded revenues for the year to 30 April 2011 of £4.2 million (2010: £3.1 million) and adjusted EBITDA of £2.6 million (2010: £1.1 million) and have seen accelerated growth in the months following that. Ash Gaming's pro forma annualised financials taken from the six month period to 31 October 2011 totalled revenues of £5.3 million and adjusted EBITDA of £3.4 million. The annualised run rate taken from the three month period to 31 October 2011 is significantly ahead of this figure as the business continues to grow, has won new licensees and delivered a number of new games in the past few months.

In FY2011, Ash Gaming broadened its distribution, generating revenues from over 40 games (FY2010: 30 games) operated by 30 licensees (FY2010: 24licensees) and continues to expand its product offering and operator network. This reflects the strong growth trajectory of the business which is expected to continue into 2012 as licensees who are already signed and new games come on stream.

Combined benefits

Playtech believes that there are significant combined benefits to be gained from the acquisition, including greater revenue opportunities and enhanced economics across the value chain. In addition, Ash Gaming has an experienced and well respected senior team who will further strengthen Playtech's content capabilities and depth of management.

Ash Gaming's current licensee base is well known to Playtech and the acquisition will deepen the overall relationship with a number of significant operators in the UK, Continental Europe and other regulated markets. Playtech believes that this will further strengthen the Company's position as the premier software and content provider to the gaming industry; significantly enhance its wholly-owned content library; and increase Playtech's revenue share from a number of the UK's leading operators.

With more jurisdictions seeking to regulate in the near future, the ability to deliver high quality innovative content will also progress Playtech's strategy of being the industry's supplier of choice, as it seeks to capitalise on further convergence of the online and land-based segments across regulated markets.

The acquisition will also enable the broader distribution of Ash Gaming's leading content both internationally and through a wider range of distribution channels than its historic position on an operator's Games Tab. This will include being positioned more broadly within Playtech's mainstream casino product; through poker and bingo side games; on Videobet's land based platform; and on both mobile and social platforms. This is expected to deliver a number of incremental revenue streams combined with the organic growth of Playtech's content library.

Playtech will also retain a greater proportion of the economics from its existing casino and games product. At present, Playtech enjoys full revenue share economics from wholly owned games, together with platform fees from delivering third party content through its GTS subsidiary. As the range of third party games offered by Playtech has increased, the proportion of wholly-owned content on which full revenue share is earned has reduced. The acquisition of Ash Gaming, which has one of the highest penetrations of games in the UK market and a number of licensees through Playtech's GTS open platform, will substantially increase the percentage of GTS content over which Playtech retains full revenue economics.

The total consideration for the acquisition is up to £23 million, comprising initial consideration of £15.5 million and up to £7.5 million of deferred consideration. Up to £6 million of this deferred consideration is due to be paid as to 25%, 25% and 50% on the first, second and third anniversaries of completion respectively, and is being retained, amongst other things, against warranty and indemnity claims. Up to an additional £1.5 million will be payable on the third anniversary of completion dependent on Ash Gaming delivering an agreed number of new games in that period.

Commenting on the acquisition, Mor Weizer, CEO of Playtech said:

"I am delighted that we have been able to acquire Ash Gaming. They have a fantastic reputation with their licensees for delivering class-leading and innovative content along with a growing presence both in the UK and internationally. We have known the team for some time and they will provide significant benefits to Playtech both in terms of expertise and knowhow, as well as the potential for a number of incremental revenue streams. We are very excited about our plans for extending Ash's games to a wider audience and throughout the Playtech casino product.

"The business is demonstrating significant growth and we expect this to continue. I am confident that given the historic performance and current run rate this acquisition will prove to be very attractive for Playtech's shareholders. Ash Gaming continues to deliver great games that operators want on their sites. This is key for many licensees where content is king, and we strive to provide them with the very best games and a diversified portfolio to enhance their player experience as that maximises their player loyalty and player value.

"At the same time, we see this as complementing our strategic actions by ensuring class leading content alongside our leadership in technology. Together this makes a powerful combination and by owning significant games content we will maximise both revenue and earnings across the value chain. In newly regulated markets both in Europe and other territories such as Canada, Ash Gaming's content is set to gain considerable traction."

Chris Ash, Founder and CEO of Ash Gaming commented:

"The strategic rationale for Ash Gaming to combine its successful content with Playtech's industry leading offering was evident from the earliest of our discussions. The ability to deliver our content through further casino, bingo, poker, retail and mobile channels will enable the combined business to grow faster and deliver a greater variety of cross channel product to the operators. The combination of platform and game development will lead to Ash Gaming's ideas coming to fruition earlier than would have previously been possible."

"We are looking forward to furthering our already good relationships with existing Playtech group companies and are excited by the opportunity for sharing best practice in product, technology, customer analysis and commercial areas of the business. The acquisition also provides greater opportunity for our existing management team and staff to continue to grow within a larger organisation."