Playtech has followed up online JV partner William Hill agreeing a £454m deal for Sportingbet yesterday by claiming the assets must be offered for sale to William Hill Online within six months of completion.
The software provider, currently in negotiations with William Hill over the latter potentially buying out its 29% stake in the online JV, said the assets must be offered for sale to WHO because their agreement bound Hill’s to conduct all its remote gambling activities through this vehicle.
The company said it therefore retained the right “to determine whether William Hill Online (WHO) proceeds with the acquisition of the Sportingbet Activities”, hinting at the potential use of its “strategic veto” over acquisitions which is written into the JV agreement, wielded to great effect over Hill’s bid for Probability last year.
Further, Playtech said a deal for Sportingbet could inflate the value of its stake in the online JV, declaring that “associated synergies and cost savings will be taken into consideration as part of any valuation of William Hill Online.”
William Hill issued a rapid denial of Playtech’s claims to the Telegraph, saying it had “no rights to a business that is not part of William Hill Online,” and therefore the proposed transaction for Sportingbet did not impact on any valuation of WHO.
The companies started a formal valuation of Playtech’s stake in WHO at the end of last month, with Hill’s looking to exercise its first call option to buy out the software provider’s 29% stake in its online business. The companies have each appointed a bank to determine a price for the holding, with a third independent bank called in to provide an assessment if the companies’ respective valuations are a long way apart.
Analyst valuations for the 29% stake have ranged between £300m and £500m. Hill’s will announce if it intends to proceed after the valuation process end in February 2013.
Despite the financial success of the JV, the relationship between the two companies has grown increasingly strained. Hill’s took out a legal injunction in February 2011 to prevent Playtech doing similar deals with other operators, amid rumours its JV partner was talking to arch rival Ladbrokes about a possible £2.2bn merger.
While the two companies eventually brokered a compromise allowing Playtech to enter software agreements with other large UK companies, paving the way for its July 2011 deal with Gala Coral, last October also saw nearly 600 WHO staff stage a mass walkout, allegedly orchestrated by several disgruntled senior marketers and ex Playtech employees with ties to co-founder and 49.66% Playtech shareholder Teddy Sagi.
CEO Ralph Topping is also known to be uncomfortable with Playtech’s power of veto over acquisitions written into the JV agreement.
Article written by Stephen Carter