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The Playtech Bitcoin deal / saga

Part 1: Playtech Buys Out Bitcoin CFD Trading Platform Plus500 in a £460m Deal

Playtech have (as of June 2017) not yet entered the Bitcoin market so there are no Playtech Bitcoin Casinos. But this is all set to change, particularly with Playtech having tried twice to buy a Bitcoin trading platform back in 2015 already!

June 2015 – World’s largest online gaming software provider Playtech’s Cyprus branch is reportedly buying out the online contracts for difference trading platform Plus500 in an all-cash £459.6 million deal.

Teddy Sagi, who controls Playtech Cyprus Ltd. (LSE: PTEC), announced that his company was buying the Israeli online Bitcoin and other instruments CFD trading company. Shares of Plus500 (AIM: PLUS) closed at 369.9 pence on Friday. Shareholders will receive in cash 400 pence for each share. Both the companies are traded on the London Stock Exchange (LSE).

Roughly two weeks back, shares of the Bitcoin CFD trading group crashed more than 40% as half of the accounts of UK customers were abruptly suspended, and raised fears that the accounts were being used for money laundering.

On the decision to acquire the troubled company, Playtech explained, “On 18 May 2015, Plus500 announced that the UK Financial Conduct Authority (“FCA”) had required a review of its Anti-Money Laundering (“AML”) financial sanction systems and other related regulatory controls which led to Plus500UK Limited (“Plus500UK”) prohibiting all transactions for existing customers until additional AML procedures have been completed. As a result, Plus500UK ceased on-boarding new customers.”

Playtech estimates the acquired company to immediately contribute to the company’s earnings.

Playtech’s CEO Mor Weizer expects the acquisition to help the company expand its market offerings.

Plus500 CEO Gal Haber said, “We are very proud to have built Plus500 in a short time into a significant player in the CFD market. 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.

The acquisition must have come as a sigh of relief for investors who were losing money following the strong depreciation. As the deal is priced higher than the market price, investors may also make some good money or at least reduce their losses.

Part 2: Playtech folds on Plus500 deal after regulatory concerns

November 2015 – Israeli gambling and trading software maker Playtech has abandoned its £459 million ($695 million) deal to buy troubled spread betting company Plus500, after the UK regulator failed to bless the takeover.

Playtech says in a statement on Monday (emphasis ours):

The Company has been in active dialogue with the Financial Conduct Authority (“FCA”) in relation to its proposed acquisition of Plus500, including in relation to certain concerns raised by the FCA which the Company considered could be resolved to the satisfaction of the FCA prior to 31 December 2015, being the effective long-stop date for the transaction to complete.

However, following an update from the FCA late in the afternoon of Friday 20 November 2015 and having considered its position over the weekend, the Board of Playtech is now of the view that the steps being proposed to address these concerns will not sufficiently satisfy the FCA to enable Playtech to obtain the FCA’s approval by 31 December 2015, and is therefore withdrawing its change of control application to the FCA.

The FCA’s issues with the deal, detailed in a letter on Friday, have not been made public.

Plus500’s share price went into free fall back in May after the FCA told the company its anti-money laundering checks weren’t up to scratch. Plus500 had to freeze thousands of UK accounts in the wake of the regulator’s review.

The Israeli-headquartered company lets ordinary people make risky, leveraged bets on stocks and currencies through something called a contract for difference (CFD).

Playtech’s takeover of Plus500 has been controversial from the start. The company swooped in with a low-ball bid for Plus500 shortly after it was forced to suspend its accounts.

The fellow Israeli company’s offer of £459 million ($695 million) for Plus500 is almost half the £862 million ($1.3 billion) it was worth before the crisis blew up. Hedge fund giant Odey Asset Management, Plus500’s biggest shareholder, dubbed the offer “an opportunistic bid exploiting current regulatory issues and risks.”

The deal was first announced back in June, meaning Playtech has been unable to get a seal of approval from the Financial Conduct Authority (FCA) for almost 6 months. Plus500 is an Israeli company but listed on London’s AIM stock exchange.

Playtech made its name making gambling software for companies like William Hill but has this year been seeking to move into the trading software business through a series of acquisitions.

The company said its financial business is “unlikely to have the scale of contribution to the group in the near to medium term that had previously been anticipated as a result of the acquisition of Plus500 not completing.”

Playtech is down over 9% in early trade, hitting an 8-month

Meanwhile, Plus500’s CEO Gal Haber say in a statement on Monday:

Following the agreement with Playtech that the merger between the companies will not proceed, we can confirm that our business is in good shape for a successful future as an independent company.

Plus500 remains a growing, highly profitable and cash generative company with strong momentum in an expanding international market. We have adopted a “business as usual” policy during the lengthy acquisition timetable and continued to invest in our marketing, technology and regulatory operations during this period.