Online gambling technology provider Playtech has abandoned its planned takeovers of financial trading operators Plus500 and Ava Trade due to its inability to resolve regulatory concerns.
Playtech announced this summer that it would spend £460m to acquire the UK-listed Plus500, one of a flurry of recent deals in which Playtech sought to expand its forex and spread betting presence. But Playtech announced Monday that the acquisition “will not be proceeding as planned.”
The acquisition required the approval of both the Cyprus Securities Exchange Commission and the UK’s Financial Conduct Authority (FCA). The former had already given its blessing but the FCA expressed “certain concerns” and Playtech said Monday that “the steps being proposed to address these concerns will not sufficiently satisfy the FCA” by the Dec. 31 deadline for closing the acquisition.
Playtech said the deal would have no financial impact on its performance but its share price fell 8% following Monday’s announcement. Plus500 shares fell by one-fifth before rallying to close out Monday’s trading down 6.5%. Playtech says it has no immediate plans for what to do with its existing 9.9% stake in Plus500.
Regulatory concerns have also scuppered Playtech’s acquisition of Irish financial trading firm Ava Trade. Playtech’s $105m bid for Ava Trade had been opposed by the Central Bank of Ireland, a decision that gave Ava Trade’s sellers a termination right on the deal. On Monday, Playtech announced that Ava Trade’s owners had chosen to exercise this termination right.
However, Playtech says it hasn’t given up on acquiring Ava Trade and plans to continue to appeal the CBI’s decision. Playtech said the termination of the deal meant it would forfeit the $5m non-refundable deposit it paid to get the acquisition talks started but the deal’s termination would have no other financial impact.
Israeli media outlet Globes quoted capital market sources saying Playtech founder and largest shareholder Teddy Sagi’s criminal record may have contributed to the failure of the Plus500 acquisition. The sources claimed the FCA had demanded that Sagi, who did a stint in Israeli prison in the 1990s following a conviction for stock fraud, sell most of his 30.6% stake in Playtech.
In Playtech’s Q3 earnings report, its burgeoning financials division reported revenue of €27.5m, representing 16% of the company’s overall revenue. The collapse of the two proposed acquisitions will limit the division’s future growth but it also leaves the company with about a billion dollars in ready cash lying around, leaving Playtech well-poised to pounce on any number of future opportunities in the UK’s merger-mad marketplace.