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June 12, 2012 6:51 pm
Playtech in software deal with founder
Playtech, the Aim quoted online gaming company, has agreed to pay its founder and largest shareholder nearly £5.6m per year in a series of deals which have raised eyebrows amongst some analysts in advance of an expected move to London’s main market this summer.
The Isle of Man-based company has agreed to pay companies owned by Teddy Sagi, the billionaire Israeli businessman, €6m per year for the licences to use software for online social gaming and traditional gambling activities such as online casino, poker and bingo. Mr Sagi, who has a 48.3 per cent stake in Playtech, will also receive 20 per cent of revenues from the social gaming business.
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Separately, Playtech has also agreed to pay companies owned by Mr Sagi £750,000 per year to rent office space and apartments in north London as well as a nominal fee for retaining Mr Sagi’s “advisory services”.
The deals represent a substantial modification of Playtech’s original plans – outlined this year – to pay €95m to buy Mr Sagi’s software companies outright plus another £10.5m for the London properties.
Nick Batram, an analyst at Peel Hunt, said Playtech was trying to “tidy up” before it comes to the main market.
“Related party transactions are generally not liked by [the] market and clearly there have been a number with Mr Sagi to date – but arguably they have worked out well for the company,” he said. “The reality is the sooner Playtech moves away from [related party transactions] the better for the company and investors.”
Another analyst said that there were questions about the software deal’s value for money.
“If I was an investor I would be looking at the €6m fee and revenue-sharing componen . . . there’s quite a lot of revenue in social gaming but not much profit, so if you’re paying away 20 per cent of revenues it makes it that much harder to make a profit,” the analyst said.
Mor Weizer, Playtech’s chief executive, described the licensing deal as “a cost-effective entry into social gaming”.
The deals are the latest in a long series of business transactions with Mr Sagi who founded Playtech in 1999. William Hill Online, the company’s joint venture with William Hill, was formed by acquisition of several of Mr Sagi’s gambling software companies.
Last November Mr Sagi agreed to underwrite a £100m Playtech share placingto fund new acquisitions.
Playtech shares closed down 3 per cent at 345p.
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