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Casinos> 2012
- 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."
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