Playtech Cyprus Ltd.'s (LSE:PTEC) offer to purchase for Plus500 Ltd. (AIM: PLUS) shares was welcomed by the company's five founders (their consent highlights their lack of confidence in the company's future, following the crisis created by suspicions of money laundering). One institutional shareholder, however, is not really satisfied with the price being offered for the company by Teddy Sagi.
When the Plus500 share started to lose ground, Odey Asset Management, a respected UK hedge fund and institutional investor, began accumulating the company's shares, obtaining a 25.5% holding - far more than company founder Alon Gonen. Sagi's offer of £4 per share constitutes an 8.1% premium on the market price before his offer was published.
Odey, perhaps wishing to increase its profit by forcing Sagi to better his offer, announced that it would not support Sagi's offer at the July 17 shareholders meeting called to approve the sale. According to Odey, Sagi's offer undervalues the Israeli company, and is "opportunistic." Odey says that Plus500 is worth £5 per share.
Odey's opinion is likely to pose a problem. The five Plus500 founders (one of whom withdrew from the company before the money laundering crisis) jointly own 35.6% of its capital, and acceptance of Sagi's offer requires a 50.1% majority.
It is no secret that the competition between Israeli company Plus500, which operates an online share trading platform, and UK company IG, its largest competitor, intensified as the former became more successful. It is very likely that the enviable profit margins of the small Israeli company, which began in Haifa, were making IG management uneasy. IG has a $4.3 billion market cap on the London Stock Exchange, while Plus500's pre-crisis market cap on the AIM secondary exchange was $1.3 billion.
Then along came the crisis. During the second half of last month, Plus500 announced that it was being forced to freeze some of its customers' accounts because of suspected money laundering. The Securities and Futures Authority, which supervises the company's business and that of the entire sector, began to investigate what was going on in Plus500's corridors, and the result was quite cruel, at least in capital market terms: the company's share lost 67% of its value in 24 hours, and concern about its future only grew worse. The share later staged a 48% recovery, mainly due to a "white knight" - Playtech Cyprus, a major company in the field on online gambling platforms owned by billionaire Teddy Sagi, which took advantage of the opportunity to submit an offer to purchase for Plus500 at £4 a share, reflecting a company value of $709 million - half its value at the peak.
Sagi has rather widespread forex business for which he uses Playtech Cyprus. He probably believes that in spite of the Plus500's crisis, its assets, experience, intellectual property, and of course its employees should not be passed up.
During the crisis, it was said that IG had a hand in creating it, or to put it bluntly, that the UK company had sent some kind of message to Securities and Futures Authority about how Plus500 conducted its business, setting off a warning light at the UK regulator.
There is no proof of this theory, but it is true that IG wants to recruit employees from the Israeli company. Sources inform "Globes" that IG recently published announcements on its LinkedIn and Facebook pages proposing that Plus500 employees go to work for it.
Plus500 has just over 100 employees in Israel, but as far as is known, most of them are still loyal to the company, and do not intend to switch to its competitor. Furthermore, Sagi apparently plans to retain Plus500 as an independent unit, without reducing its workforce, and even to increase its staff. Sources inform "Globes" that IG plans to open an office in Israel, probably in Haifa, Plus500's birthplace. Former FXCM Israel CEO Tal Zohar, appointed to IG's management last November, will lead the company in Israel.
Playtech said, "Playtech regards Plus500's employees as its main asset, and the purpose of the merger is not to cut back its business; it wants to expand and extend it. The company founders have already announced that they will stay employed at the company after the merger, and we anticipate full cooperation with them and the other employees in stabilizing and developing its activity."
Published by Globes [online], Israel business news - www.globes-online.com - on June 10, 2015
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