Aristocrat Leisure won’t acquire Playtech after all. The deal had been expected to strengthen competition in the iGaming supplier and online casino live dealer space.
According to Aristocrat, the deal’s failure was largely due to investors who bought into Playtech after talks were already underway. In the end, it couldn’t muster the necessary 75% shareholder support. The company says it’s now going to look elsewhere to add to its real-money gambling capabilities.
Playtech, meanwhile, says that it is currently considering other offers, but didn’t reveal names.
This news may bring an appropriate sense of déja vu on Groundhog Day, reminiscent of the film by that name. After all, it echoes last year’s stories of Entain rebuffing its suitors – first its BetMGM joint venture partner, MGM Resorts International, and then DraftKings.
As for today’s rejection, Aristocrat and Playtech expected the outcome even before Playtech shareholders met today in London. Playtech’s morning announcement about the impasse said negotiations with Aristocrat were ongoing. By the afternoon, Playtech said shareholders voted against the Aristocrat bid.
What this failed $3.7 billion deal means for the US online gambling industry is, as yet, undetermined. However had it gone through, it could have helped the combined company compete with the likes of Scientific Games (SG) and Evolution. All of these companies are fighting for market share in the B2B casino game supplier space.
That battle now includes the US live dealer casino market, as well. Playtech just launched its own live dealer offerings, and Scientific Games plans to do so soon. Evolution had long enjoyed an effective monopoly on such products in the US.
Aristocrat confused, looking elsewhere
Groundhog Day scenarios notwithstanding, Playtech won’t get a do-over on the deal. Aristocrat says it is no longer interested in the acquisition.
Aristocrat CEO and Managing Director Trevor Croker said:
“Our focus now shifts to accelerating our plans for alternative online RMG scaling options, and continuing to execute our growth strategy, in a way that is consistent with our rigorous investment criteria, high regulatory standards and integrity.”
Before Playtech shareholders gathered today, they teased the idea of turning Aristocrat down to entertain “attractive M&A proposals it has received from third parties.”
Here, too, is a bit of déja vu for Aristocrat. Today’s meeting was the result of a previous delay by Playtech to consider its alternatives.
Aristocrat blamed Playtech shareholders “who have not engaged meaningfully about their views” for blocking the acquisition. It says these dissenters have only acquired their stake in the company since October last year.
Aristocrat’s announcement added:
“Aristocrat has taken every possible step to engage with this group of shareholders and progress the Recommended Acquisition, and to consider all options including alternate transaction structures.”
Croker expressed disappointment and he characterized the situation as “highly unusual and largely beyond Aristocrat’s control.”
Aristocrat vs. JKO Play
Playtech originally expected to have its shareholders vote on the takeover Jan. 12. As mentioned, it delayed meeting in order to consider a competing bid from JKO Play.
JKO, a London-based investment and acquisitions company, bowed out of the bidding in an announcement just over a week later, on Jan. 21.
Five days after that, on Jan. 26, Playtech was back to saying it was only interested in Aristocrat’s offer:
“Playtech notes recent media speculation on the Company’s future strategy. The Board of Directors reiterates its recommendation that shareholders vote in favour of the offer from Aristocrat Leisure Limited (“Aristocrat”). Whilst Playtech has made significant strategic and operational progress and is in a strong position for the future, Aristocrat’s proposal provides an attractive opportunity for shareholders to accelerate the delivery of Playtech’s longer-term value.”
Playtech vs. SG
Playtech and SG have both made the decision to jettison the non-iGaming portions of their respective businesses in order to focus on online casino. Both hope to grow their footprints in that vertical. For now, SG is the bigger of the two.
Conversely, Isle of Man-headquartered Playtech counted €457.4 million in revenue during that same period, or a bit over $500 million.
If today’s deal with Aristocrat had gone through, Playtech’s revenue would have been added to the $3.6 billion (AUD $4.7 billion) generated by its new owner.
Live dealer in US, Canada
In an early gift to US online gamblers, Playtech announced on Christmas Eve that it launched live dealer offerings in Michigan and New Jersey.
So far, Playtech is the only US live dealer competitor to Evolution and its subsidiary, Ezugi. SG plans to enter the market soon.
Evolution, though, has studios in Michigan, New Jersey and Pennsylvania. Plus, the company is adding one in Connecticut.
Stockholm-based Evolution’s Q3 2021 earnings report said:
“We are currently building our fourth US studio in Connecticut and live casino games will be added to the offering as soon as possible.”
Even though Evolution has a global footprint, that Q3 2021 report names the US and Canada as its main growth markets.
Live dealer is developing “rapidly” in the two North American countries, Evolution said:
“[Ontario] is the fourth Canadian province to partner with Evolution, joining British Columbia, Alberta and Québec in streaming live games from Evolution’s Vancouver studio.”
In the US, states are requiring studios to be located within their borders.
Live dealer demand is growing on Earth
As for Evolutions take on worldwide live dealer demand, the report said:
“Live Casino revenue growth was 53.2 percent compared to Q3 2020, which is higher than the pre-pandemic growth rate levels, showing that many of our newer players are staying in the network.”
Plus, live dealer revenue outpaces the Swedish company’s other product, random number generators (RNG), by 3.5 times. During Q3 2021, live dealer revenues totaled €214.5 million. That converts to $239.1 million.
Therefore, live dealer largely contributed to the company’s overall 100% revenue growth during the nine months leading up to Sept. 30, 2021, vs. the same period in 2020. That €768.5 million revenue total equates to $856.7 million.
Playtech, too, is thinking beyond North America.
On Jan. 20, Playtech provided UK online casino players with “the launch of the largest scale studio development in the supplier’s history.”
According to the Playtech announcement with a London dateline, its partnership with bet365 yielded this new live dealer offering:
“Built across two separate studios, the new development is the biggest Live Casino studio launch in Playtech’s 22-year history.”