Playtech Online Gambling Folds on $700m Merger

The gambling software company Playtech has announced it is scrapping its planned $698million of Plus500 because of problems with regulatory bodies.

Their $105million deal for AvaTrade also looks likely to be shelved after the Financial Conduct Authority (FCA) was rumoured to be ‘anxious’ about Playtech’s founder and major shareholder, Teddy Sagi.

Sagi, the 43-year-old Israeli-born businessman, worth some $3.7 billion according to Forbes, was allegedly convicted of fraud some 20 years ago according to reports in Jewish Business Daily. The FCA are also rumoured to have asked for Sagi’s controlling interests in PlayTech to be significantly reduced before giving the acquisitions the OK.

As Plus500 are, “in the business of enabling trading for contracts for difference (CFDs),” the regulators may be concerned that the ‘significant risk’ of speculating on price movements – which can fluctuate significantly, and come without the usual security measures in place – could cause problems with PlayTech’s “lack of knowledge and experience in the CFD business itself.”

With a clamp-down on Plus 500’s money-laundering procedures, PlayTech is fearful that AvaTrade may also ask the FCA to say yes to any buyout, which seems unlikely to happen in view of their reluctance to ok the Plus500 deal. The AvaTrade acquisition was first announced in July and is worth $105m.

Although the company claims it will not incur any financial penalties for terminating the Plus500 deal, and have no plans in place for reconsidering its existing 9.9 per cent holding in the CFD company, their share-price fell by 8% following the announcement. However Playtech stated that its Gaming division ‘continues to enjoy double-digit underlying growth.’

Plus500 are said to be “planning an independent future” in the wake of the announcement and reconfirms a base dividend pay-out ratio of 60% of retained profits. It has also approved a ‘share buy-back programme’ of shares totaling $20million, which it plans to fund from ‘available working capital’.