As Odey Asset Management pushed its ownership in shares of Plus500 above 25%, they put themselves in a strong position to reject Playtech’s bid for the online CFD and forex broker. Calling Playtech’s 400p bid for Plus500 as “opportunistic”, the offer came this Monday after shares of the broker had been trading above 750p in mid-May, but were more than halved after UK compliance issues forced the broker to freeze the accounts of many of its customers.
Responding to Playtech’s offer, Odey issued a statement through the London Stock Exchange that they didn’t plan to vote for the acquisition. They explained that they believed at 400p a share, Playtech’s bid “materially undervalues Plus500.” Odey added that even given the current regulatory issues around Plus500, they believed “the intrinsic value of the business on a longer term view is materially higher than 400p.”
Odey also referenced Plus500’s management and staff, saying that the deal could make financial sense to them now, as well in the future, as they could be expected to be further incentivized by Playtech. Nonetheless, for independent shareholders, the deal undervalues their ownership.
The statement also appeared to be calling attention to additional bidders to emerge from within the industry, as they stated, “We believe that the financial and strategic value of Plus500 to an industry bidder is significantly higher than valuation as a standalone entity.”
Board’s Power Limited
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In sending a rejection of the deal, Odey is publicly pushing Plus500’s board to open up its sale to a wider audience of brokers. Even if management were to refrain from canvassing better offers, with Odey holding over 25% of shares, the board might not have enough influence to pass the deal.
According to ownership data as of March 16th from Plus500, directors and founders control 35.64% of the broker’s shares. As a result, the board would need to gain 37% of shares not in Odey’s hands in order to vote for the deal. However, with other asset managers holding a large portion of those shares, they may be inclined to unite with Odey in rejecting the deal.
When reviewing Playtech’s offer on Monday, Finance Magnates theorized that another potential acquirer could be IG Markets. As a public company, the broker has the ability to issue shares to pursue a deal. In addition, the deal would allow IG to defend its strong position in the UK, as well as benefitting globally from Plus500’s marketing technology.
Other potential acquirers could also come from the UK. One dark horse candidate is CMC Markets. Similar to IG, CMC Markets could see value from acquiring Plus500’s technology. However, as a private company with its own aspirations of going public, a bid for Plus500 may not be feasible at this time. One solution though, would be to structure a reverse merger where CMC would in essence go public through taking over shares in the public Plus500.