Teddy Sagi scents an opportunity. Following the collapse in the share price of Plus500 (AIM: PLUS), Playtech Cyprus Ltd. (LSE:PTEC), which Sagi controls, announced today that it was buying the Israeli online trading company. Both companies are traded on the London Stock Exchange.
Plus500 shareholders will receive 400 pence for each share, in cash. Plus500 shares closed on Friday at 369.9 pence. The total value of the deal is 459.6 million pounds sterling.
As the background to the acquisition, Playtech states: "On 18 May 2015, Plus500 announced that the UK Financial Conduct Authority ("FCA") had required a review of its Anti-Money Laundering ("AML") financial sanction systems and other related regulatory controls which led to Plus500UK Limited ("Plus500UK") prohibiting all transactions for existing customers until additional AML procedures have been completed. As a result, Plus500UK ceased on-boarding new customers.
"Further to this, recent events and associated publicity have meant that Plus500 has become the subject of increased scrutiny and has received additional requests for information from its regulators in the jurisdictions in which it is licensed. Whilst Plus500's products, technology and marketing skills remain strong, the recent regulatory scrutiny placed on Plus500 has highlighted the advantages of expanding the operational infrastructure to support a business of its size.
"Playtech intends to provide Plus500 with access to its market leading technology and infrastructure, in combination with its expertise of operating a multi-jurisdictional regulated business."
Plus500 deals in CFDs (contracts for difference), online trading in securities and commodities with the company charging a commission on the difference between the buy and sell prices. The company's share price declined sharply after the announcement of the investigation by the UK regulatory authorities into its documentation of the verification and identification of customers, which led to some of the company's customer accounts being frozen.
In its announcement, Playtech states that the rationale for the acquisition is that it represents a unique opportunity due to Plus500's market reach, advanced technology, product offering and existing customer relationships globally, which allows it to successfully attract and convert customers. It adds that the combination of Plus500 with Playtech's recently acquired TradeFX business will enable the combined business to maximize the market opportunity and product offering by utilizing the strengths of both businesses; that Playtech intends to provide Plus500 with CRM capabilities and expertise to maximize customer life time value and improve its standalone financial performance; and that Plus500's management have executed undertakings that they will remain with the business for a period of 12 months from completion of the acquisition to secure a smooth transition to Playtech management.
Playtech estimates that the acquisition will be immediately earnings enhancing.
Playtech CEO Mor Weizer said, "Having recently completed the acquisition of TradeFX, the opportunity to acquire Plus500 will prove transformational for our ambitions to expand Playtech's wider offering. As an immediately earnings enhancing acquisition, the combination of the two businesses is compelling, enabling us to apply our market-leading products and services to the enlarged financial trading business as we continue to execute our growth strategy for the Group."
Plus500 CEO Gal Haber said, "We are very proud to have built Plus500 in a short time into a significant player in the CFD market. Having been admitted to AIM at a share price of 115p on 24 July 2013 and paid significant dividends during this time, we believe that now is the right time to combine the business with Playtech who can provide additional infrastructure and expertise to add to our core skills in products, technology and marketing."
Published by Globes [online], Israel business news - www.globes-online.com - on June 1, 2015
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