Playtech plc
("Playtech" or the "Playtech Group")
Playtech enhances B2B offering in Financials division with CFH acquisition
Playtech (LSE: PTEC) today announces it has agreed to acquire Consolidated Financial Holdings A/S ("CFH"), a technology company with products including a leading Straight Through Processing ("STP") brokerage which provides retail brokers with multi-asset execution, prime brokerage services, liquidity and complementary risk management tools. The acquisition will enhance Playtech's position as it continues to build a B2B offering within its Financials division.
CFH's wholly owned subsidiary, CFH Clearing Limited ("CFH Clearing") is regulated by the Financial Conduct Authority (the "FCA") and Playtech confirms that regulatory approval has been received.
Playtech will acquire 70% of CFH upon completion of the acquisition, which is due to take place on 30 November 2016. The remaining 30% will be subject to put and call options between Playtech and CFH's management team, who are remaining with the business, and which can be exercised in 2019.
About CFH
CFH has proven technological capabilities and generates revenue primarily from trading volume processed through its brokerage platform, either as clearing fees or technology services. It currently has over 400 customers and partners worldwide in more than 80 countries, which service thousands of retail customers worldwide, and is considered one of the largest and most reputable B2B providers for technology and clearing in the industry.
Through its proprietary ClearVision technology, CFH's services to customers include providing liquidity control and customisation capabilities; real time risk management tools; and cloud-based back office.
CFH Clearing is one of the top STP venues in the world with award-winning liquidity services and $1.5bn in direct interbank credit lines with tier 1 banks, liquidity providers and prime brokers including Barclays, Goldman Sachs, UBS, Jefferies and BNP Paribas. Through its relationships with liquidity providers and prime brokers, CFH is currently able to offer liquidity on approximately 110 instruments.
Revenue and adjusted EBITDA generated for the year ended 31 December 2015 was $19.2m (€17.6m*) and $5.7m (€5.2m*) respectively, while recent trading has reflected an annual revenue run rate of $29.0m (€26.6m*), on the back of an uplift in volume from further organic growth of the business and new customers being onboarded.
Benefits of the acquisition
There are multiple benefits in CFH becoming part of Playtech's Financials division:
· CFH will remain a provider of STP processing and, due to Playtech's scale and financial strength, will be able to provide its customers with improved trading terms and more attractive margins;
· CFH customers will have access to a deeper pool of liquidity through the addition of intra group liquidity arrangements, enabling more competitive prices and faster execution;
· CFH will have access to the Playtech's Financials division's wide range of CFD instruments which CFH will be able to offer on its clearing system over time;
· CFH's customer base will have access to Playtech's proprietary trading platform alongside the Playtech Group's CRM technology, mirroring Playtech's B2B offering in the Gaming division; and
· CFH will benefit from Playtech's leading technological superiority to further develop its offering and improve client experience.
Terms of the acquisition
The Playtech Group will pay up to $120m (€110.1m*) for CFH. This comprises:
· an initial consideration of $43.4m (€39.8m*), on a cash free / debt free basis, for 70% of CFH's fully diluted share capital, representing a multiple of approximately 7x the current EBITDA run rate; and
· an additional consideration for the remaining 30% of CFH which will be subject to a put and call option which is exercisable in 2019 at a multiple of 6.0x CFH's adjusted EBITDA for the year ending 31 December 2018, capped at $120m less the initial consideration ($76.6m) for the 30%.
CFH's management will remain with the business following completion and will retain the remaining 30% of CFH which is subject to the aforementioned put and call option. Completion of the acquisition, which is subject to the satisfaction of certain conditions, is expected to take place on 30 November 2016. The acquisition is immediately earnings accretive for Playtech.
Current trading in Playtech's Financials division
As stated last week at the time of Playtech's event for investors and analysts, the Financials division has seen very positive signs of improvement in first time depositors and active customers in H2 2016 although overall performance has been impacted by low market volatility.
Ron Hoffman, Chief Executive Officer of Playtech's Financials division, said:
"The acquisition of CFH will strengthen Playtech's offering in the B2B market of financial trading and provide the foundation for future acquisitions as well as to become one of the only businesses to offer proprietary, dedicated B2C and B2B platforms to clients.
"CFH has proven technological capabilities and has developed not only a leading platform in the STP Brokerage industry, but also relationships with an impressive range of retail brokers operating in a variety of jurisdictions worldwide, alongside long term relationships with a suite of tier 1 banks, prime brokers and liquidity providers.
"We are delighted to welcome CFH and its management team into Playtech's Financials division and believe that the CFH brand will continue to flourish within the Playtech family."
Christian Frahm, Founder and CEO of CFH, said:
"CFH's vision was always to empower local brokerage businesses around the world, allowing them to successfully compete in their markets by providing end customers the best access to pricing, technology and tools.
"Being part of Playtech gives us access to best of breed technology, significant resources and expertise to become the number one B2B provider in the industry."
Conference call
Ron Hoffman, Chief Financial Officer of Playtech and Chief Executive Officer of Playtech's Financials division, and Neil Offord, Chief Financial Officer of Playtech's Financial's division, will host a conference call today at 9.30 am. Details of the conference call are as follows:
Dial-in number: 020 3059 8125
Dial-in number for USA: +1 631 9833 103
Participant Password: Playtech
Replay (available for one week)
Dial-in number: 0121 260 4861
Dial-in number for USA: +1 844 2308 058
Replay pin number: 4733889#
An audio file will be also available on the Playtech website following the conference call.
This announcement contains inside information.
* on the basis of $1.0904:€1
- Ends -
For further information, contact:
Playtech plc Ron Hoffman, CFO of Playtech and CEO of Playtech's Financials division Neil Offord, CFO of Playtech's Financials division c/o Bell Pottinger Andrew Smith, Head of Investor Relations |
+44 (0)20 3772 2500 +44 (0)1624 645954 |
Bell Pottinger David Rydell / Olly Scott / James Newman / Laura Jacques |
+44 (0)20 3772 2500 |
About Playtech
Playtech is a market leader in the gambling and financial trading industries. Founded in 1999 and listed on the Main Market of the London Stock Exchange, Playtech has more than 5,000 employees in 13 countries.
Playtech is the gambling industry's leading software and services supplier with more than 130 licensees globally, including many of the world's leading regulated online, retail and mobile operators, land-based casino groups, government sponsored entities such as lotteries, and new entrants opening operations in newly-regulated markets. Its business intelligence-driven gambling software offering includes casino, live casino, bingo, poker and sports betting.
It is the pioneer of omni-channel gambling which, through Playtech ONE, offers operators and their customers, a seamless, anytime, anywhere experience across any product, any channel (online, mobile, retail) and any device using a single account and single wallet. It provides marketing expertise, sophisticated CRM solutions and other services for operators seeking a full turnkey solution.
Playtech's Financials division, run through subsidiary Markets Limited (formerly called TradeFX), is an established and growing online CFDs broker and trading platform provider, operating the brand markets.com. Its B2C focused offering is available in more than 100 countries and in more than 25 languages and is licensed and regulated in the EU and South Africa.
www.playtech.com