Ladbrokes has signed a performance-based software and services agreement with Playtech, as it looks to the supplier to engineer the turnaround it achieved with bitter rival William Hill’s online business.
The five-year deal will see Ladbrokes.com extend its software agreement with Playtech, starting with a new “Vegas” tab, eventually adding its download casino product and migrating its poker room from the Microgaming network to Playtech’s iPoker. Lads will also enter an advisory agreement with Playtech’s PTTS turnkey services arm from May 2013, establishing a wholly owned digital marketing arm in Israel headed by senior managers from CRM company the Nation Traffic, which works closely with Playtech.
The “no win, no fee” structure of the deal will see Playtech receive incremental instalments of its success fee for increasing Ladbrokes digital earnings (EBITDA) by increments of £35m, £70m and £100m. The eventual payment of a one-off bonus equivalent to 75% of any excess above the eventual £100m target achieved by the end of December 2017 will be capped at £50m.
Ladbrokes generated an operating profit of £31.8m from digital in 2012, 39% down on the prior year due to heavy investment in digital infrastructure and start-up costs in the regulated markets of Spain and Denmark. William Hill Online’s operating profit was up 36% to £145.3m in the same period.
Playtech CEO Mor Weizer said the structure of the deal with Ladbrokes announced today “reflects our confidence in accelerating Ladbrokes’ Digital revenue growth.”
Ladbrokes boss Richard Glynn added that the deal represented “the next phase” of the reinvigoration of its online business, and would accelerate its progress “in a sustainable way”.
The deal announced today follows less than two weeks after William Hill agreed to pay £424m to buy out Playtech’s 29% stake in its William Hill Online JV. Ladbrokes was first rumoured to be talking to Playtech about a deal more than two years ago, forcing Hill’s to take out a legal injunction in February 2011 aimed at preventing its JV partner from entering similar deals with other operators.
Article written by Stephen Carter
