Gambling giant Aristocrat (ASX:ALL)
has made an offer to acquire the UK online gambling software Playtech, valuing the enterprise at $5 billion.
Aristocrat is offering 680 pence per share to Playtech, valuing its share capital to $3.9 billion (£2.1 billion). The value is 11.4 times Playtech's earnings for FY21. Aristocrat believes the acquisition will accelerate its growth strategy by growing their gaming content, delivering medium-term revenue and earnings growth and expanding its range of customers.
To fund the purchase, Aristocrat will use existing cash of $1.1 billion, a new term loan B issue of $2.8 billion and an equity raising of $1.3 billion via an entitlement offer to shareholders. Under the entitlement offer, shares will be issued at $41.85 per share, which represents an 8.6 per cent discount to the closing price last Friday.
Aristocrat expects to maintain a strong balance sheet post the acquisition. The conservative funding will allow Aristocrat to continue financially supporting its strategy, pay a final FY21 dividend and receive mid to high single digit earnings per share accretive during the first full year of ownership, according to the company.
“The proposed combination would bring together Aristocrat’s world-class gaming content and customer and regulatory relationships with Playtech’s industry leading global online RMG platform (B2B) and European B2C footprint," said CEO Trevor Croker.
The good news for the company is that the Playtech Board is unanimously recommending that its shareholders vote in favour of the deal. Playtech directors who own Playtech shares have irrevocably undertaken to vote in favour of the takeover.
“The combined group would offer a broad portfolio of end-to-end solutions for gaming customers around the world, as well as seamless player experiences, underpinned by a shared focus on responsible gameplay and innovation.”
Shares in Aristocrat (ASXALL) are in a trading halt today.