In a surprise move, the latest merger and acquisition deal for Tedi Sagi’s venture Playtech, where he is the biggest shareholder, is to purchase the ailing brokerage Plus500. The boards of the companies have reached an agreement valuing the broker at 400 pence per share in cash.
The final valuation of the company is approximately £459.6 million, which is almost half the value that the stock market gave to the company merely 2 weeks ago. The move marks a further divestment for Playtech into the retail foreign exchange space after the company acquired TradeFX Limited, the firm behind the Markets.com brand.
The deal represents a premium of 8 percent over Friday’s closing price for shareholders of Plus500. The deal adds to the speculation about an incoming Financial Conduct Authority (FCA) review of the business practices of Plus500, after on the 18th of May, the broker revealed that the regulator was looking into the firm’s Anti-Money Laundering (AML) financial sanction systems.
As a result, all the broker’s clients funds have been frozen pending an appropriate AML review for each customer. Suspicions about the major blow to the business model of Plus500 that was dealt by the prospects of an FCA review, in conjunction with the associated damage to the brand after the freezing of client funds in the UK, have been confirmed.
The board of Plus500 now expects the revenue figure for 2015 will be lower than in 2014.
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Commenting on the announcement, the CEO of Playtech, Mor Weizer, said, “Having recently completed the acquisition of TradeFX, the opportunity to acquire Plus500 will prove transformational for our ambitions to expand Playtech’s wider offering.”
“As an immediately earnings enhancing acquisition, the combination of the two businesses is compelling, enabling us to apply our market-leading products and services to the enlarged financial trading business as we continue to execute our growth strategy for the Group,” he added.
Adding his input on the deal, the CEO of Plus500, Gal Haber, stated, “Having been admitted to AIM at a share price of 115p on 24 July 2013 and paid significant dividends during this time, we believe that now is the right time to combine the business with Playtech who can provide additional infrastructure and expertise to add to our core skills in products, technology and marketing.”
While the acquisition represents a premium for the early shareholders of the company, for the late investors it has been a significant blow. The value of Plus500 on the stock market reached about £897 million days before the ill-fated compliance failure was revealed.
The management of Plus500 will remain with the business for a period of 12 months. The deal is expected to be completed by the end of September 2015, subject to a regulatory and shareholder approval.