Playtech completes social licensing agreement
Solutions provider to pay 6m annual licence fee amid calls for "more clarity" over agreement " Sagi confirmed as special advisor.
Playtech has finalised its software licensing agreement with founder Teddy Sagi’s social gaming assets, thought to be CTXM and Viaden Gaming, as part of the company’s plans to join the main list on the London Stock Exchange later this year.
The deal will give the solutions provider access to the B2C platforms and products developed by CTXM and Viaden, including Slots Farm and rummy brand Raminoz, which attract more than 1.5m monthly active users. In a statement this morning Playtech said the incorporation of such an offering into the company’s core B2B business model would “provide the potential to build a significant new stream of additional earnings to Playtech.”
Skywind Holdings Limited, the company with which the deal was signed and understood to be owned by Sagi, will also gain use of Playtech’s real-money gaming software as part of the deal.
The deal also means that Playtech will gain exclusive use of real-money mobile poker and casino software, complementing its mobile sportsbook Mobenga, which was acquired in July 2011 and yesterday signed an agreement with Italian operator Sisal to provide a sportsbook for Android and iOS platforms. It will also have access to more than 150 social and mobile games developers, thought to be based in Eastern Europe.
The company will pay an annual licence fee of 6m plus a royalty fee of 20% of social gaming revenues to Skywind, but will not pay any royalties on revenues generated from real-money software.
Playtech CEO Mor Weizer (pictured) said this morning that the agreement gave the supplier “a cost effective entry into social gaming,” and would enhance its mobile offering: “Mobile and social gaming will lead the gaming industry’s growth and present significant opportunities for the company. With access to a sizable and proven development team Playtech will be able to maintain its position as the leading online gaming software provider.
“We will offer a comprehensive and innovative solution to online gaming operators wishing to access the social gaming market and strengthen their mobile offering. Similarly we will enable social gaming companies to access a full suite of products in social and real money gaming,” Weizer said.
The deal was originally due to be an outright acquisition of CTXM and the purchase of a 20% stake in Viaden Gaming, as exclusively revealed by eGaming Review earlier this year, with Playtech targeting deals with sportsbook operators. However, the company back-tracked on the acquisition and investment, announcing in its Q1 results for the first three months of 2012 that the deal had been switched to a licensing agreement following concerns from analysts over related-party transactions.
Analyst Nick Batram of Peel Hunt reiterated these concerns this morning, despite retaining his firm’s ‘Buy’ recommendation, saying that “more clarity [was] required”:
“Today’s announcement was expected, but such transactions hardly help allay the fears of those concerned about corporate governance. Rather than clarify the situation with related parties, the software licensing deals appear to cloud the picture further. Ironically, if Playtech had acquired the business as it originally proposed, then this would not have arisen, although it did raise other questions and the upfront cost would have been significantly more,” Batram explained.
It was part of a 95m investment in the social sector announced in April, which also saw Playtech’s UK subsidiary GTS strike a deal to move into an office owned by a company in which Sagi had interests, and the hiring of Sagi “ the company’s majority shareholder “ as a special advisor for a nominal salary of 1 per year.
Both deals have also been completed, with GTS signing two 10-year leases with Anise Developments Limited and Anise Residential Limited, gaining use of 10,000 sq ft of office space, and nine furnished apartments on Jamestown Road in Camden Town in London, having had rent-free use of the property since November last year. GTS will pay an aggregate rent of £750,000 for the premises, which have been fitted out to the company’s specifications at a cost of £350,000 and covered by Anise.
Sagi has also been confirmed as an advisor to Playtech, providing “strategic advice as the company requests from time to time,” with the agreement only able to be terminated five years after “Mr Sagi ceases to be legally or beneficially interested in the share capital of the company.” However, the statement released this morning explained that “the company is not obliged to involve Mr Sagi in any matter.”
The announcement comes a day after it emerged that the UK Gambling Commission is exploring the possibility of regulating the social gaming sector.
Playtech is also thought to have applied for a Nevada egaming licence, according to reports.