Bank Leumi and Two Israeli Firms to Leap into MBO-Led TradeTech Acquisition

The investment arm of Israeli lender, Leumi Partners, is reportedly working to build up alliance with Menora and Phoenix

Bank Leumi (TASE: LUMI) has joined forces with two Israeli insurance companies to take part in negotiations to acquire Playtech’s trading technology division, TradeTech. Israeli news agency Calcalist first reported their participation in the bidding.

The investment arm of Israeli lender, Leumi Partners, is reportedly working to build up an alliance with Menora and Phoenix which will then team up with a group combining Fortissimo Capital and Israeli entrepreneur, Zvika Barenboim.

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The group has converged over recent weeks to explore a combined bid, and if it does ultimately purchase TradeTech, each of the new bidders will acquire 10% to 15% of TradeTech. Fortissimo and Barenboim were reportedly pursuing to control 60% of the unit originally founded by an Israeli businessman, Teddy Sagi.

To sweeten their offer, the new group is floating the idea of considering a management buyout (MBO) route, whereby TradeTech managers will lead the takeover transaction and acquire around 10 percent of their company.

Most obviously, this allows for a smooth transition of ownership and would likely shorten the due diligence process as the buyers already have full knowledge of the company. Further, the MBO scenario would put other parties and groups showing interest in the business at a certain disadvantage.

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Playtech’s management said earlier in a regulatory filing that they were ‘evaluating all options’ for the TradeTech business, which could be understood it was looking at a sale, or partial sale.

Additionally, the Calcalist report has revealed further details about the collaboration between Fortissimo and Barenboim. The publication said that each sought to compete separately for the company, but they ultimately decided to combine forces. Avi Ortal, CEO of Leumi Partners, who led the negotiations between several institutional bodies, assumed that it would maximize their chance to win the deal.

Completion of the partnership deal is contingent on conditions, principally approval by the boards of directors of the three Israeli institutions, which is yet to be voted when the group wins the tender.

Playtech has hired UBS Investment Bank to sell TradeTech, and it is looking for an initial bid between $200 million to $250 million. The trading technology division had a strong start this year as increased market volatility, led by Covid-19 chaos, boosted revenue. However, before that Playtech trimmed its profit guidance due to highly challenging trading conditions and a regulatory crackdown on risky trading products.

Playtech’s TradeTech division includes TradeTech Alpha, created to deliver a B2B solution, Markets.com, a provider of CFD and FX trading to retail investors, and MarketsX, a dedicated B2C brand for high-net worth clients. Furthermore, TradeTech Group includes CFH, which it acquired in 2016.

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