REG - Playtech PLC - Strategic agreement with Caliplay

PlaytechAnnouncement

16/09/2024 07:00

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RNS Number : 2307E  Playtech PLC  16 September 2024

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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

Playtech plc

 

("Playtech", the "Company", the "Group" or the "Playtech Group")

 

Strategic agreement with Caliplay

 

Revised strategic agreement set to drive further growth

Playtech is pleased to announce it has reached agreement on the terms of its
strategic agreement with Tecnologia en Entretenimiento Caliplay, S.A.P.I. de
C.V. ("Caliplay"), a subsidiary of Corporación Caliente, S.A. de C.V.
("Caliente").

Under the amended terms, Playtech will:

·    Hold a 30.8% equity interest in Caliente Interactive, Inc.  ("Cali
Interactive"), which will be the new holding company of Caliplay (the
"Caliplay Group"), incorporated in the United States

·      Be entitled to receive dividends alongside other shareholders in
Cali Interactive. Playtech will also have the right to appoint a Director to
the Board of Cali Interactive

·      Enter into a revised eight-year B2B software licence and services
agreement

·      Receive from Cali Interactive an additional US$140m paid in cash,
phased over a four-year period

In addition, Caliplay has resumed paying the Playtech Group its software and
services fees with more than €150 million (amounting to more than 80%) of
the unpaid fees due from Caliplay to the Group having now been received. The
balance has been paid into escrow and is to be released either on the closing
of the revised arrangements (expected in Q1 2025) or by the end of 2025 at the
latest.

The revised arrangements are conditional upon Mexican antitrust approval and
closing is expected to take place in Q1 2025. There is an agreed standstill of
all current legal proceedings between Caliente, Caliplay and Playtech, and
those proceedings will be dismissed in full once the revised arrangements come
into effect.

 

Caliplay trading update

Playtech has now received updated information on Caliplay's financial
performance and confirms that Caliplay has continued to perform strongly in
the first half of 2024.

 

Mor Weizer, CEO of Playtech, said:

 

"During the past nine years, we have worked closely with Caliplay to create a
successful and rapidly growing digital business in Mexico. The revised
arrangements mark the beginning of an exciting new chapter that will build on
the impressive progress to date, with a view to driving significant further
growth for Cali Interactive in the future.

 

"The agreement with Caliente and Caliplay underlines the attractiveness of
Playtech's leading proprietary technology. With a strong position in Mexico
and exposure to other fast-growing markets in the Americas and Europe, we
remain well-placed to deliver strong growth in our B2B business in the coming
years."

 

Emilio Hank, Chairman of Caliplay, said:

 

"We are delighted to finalise this renewed agreement which shows the inherent
strength of the strategic relationship between Caliplay and Playtech. We are
focused on growing Caliplay, leveraging our core strengths and Playtech's
leading technology to broaden our geographical footprint, as we continue in
our mission to give the best gaming experiences to our customers in Mexico and
beyond."

 

For further information contact:

 

 Playtech plc                                 +44 (0) 20 3805 4822

 Sandeep Gandhi, Head of Investor Relations

 c/o Headland

 Headland (PR adviser to Playtech)            +44 (0) 20 3805 4822

 Lucy Legh, Jack Gault

 

This announcement contains inside information for the purposes of the UK
Market Abuse Regulation. The person responsible for releasing this
announcement is Sandeep Gandhi (Head of Investor Relations).

 

About Playtech

Founded in 1999 and listed on the Main Market of the London Stock Exchange,
Playtech is a technology leader in the gambling industry with over 7,700
employees across 19 countries.

 

Playtech is the gambling industry's leading technology company delivering
business intelligence driven gambling software, services, content and platform
technology across the industry's most popular product verticals, including,
casino, live casino, sports betting, virtual sports, bingo and poker. It is
the pioneer of omni-channel gambling technology through its integrated
platform technology, Playtech ONE. Playtech ONE delivers data driven marketing
expertise, single wallet functionality, CRM and responsible gambling solutions
across one single platform across product verticals and across retail and
online.

 

Playtech partners with and invests in the leading brands in regulated and
newly regulated markets to deliver its data driven gambling technology across
the retail and online value chain. Playtech provides its technology on a B2B
basis to the industry's leading retail and online operators, land-based casino
groups and government sponsored entities such as lotteries. Playtech directly
owns and operates Snaitech, the leading sports betting and gaming company in
online and retail in Italy.

 

 

Further information on the revised strategic agreement

Cali Interactive

Cali Interactive will be the new holding company incorporated in the United
States which will own Caliplay.  Upon the revised arrangements coming into
effect, Playtech will have a 30.8% shareholding in Cali Interactive. Playtech
will have certain customary shareholder rights, including the right to appoint
a Director to the Board of Cali Interactive for so long as Playtech's equity
interest is at least 15% of Cali Interactive. Subject to available cash and
applicable law, Playtech and all other Cali Interactive stockholders will
receive dividends, at least quarterly, pursuant to an agreed dividend policy.

 

Software and services agreements - Mexico

The software and services arrangements under the original strategic agreement,
which ran until 2034, will be replaced by revised agreements between the
Playtech Group and the Caliplay Group for its existing Mexican business.

 

Revised B2B software licence and services agreements will be entered into
between the Playtech Group and the Caliplay Group for an eight-year period to
31 December 2032, which will include exclusivity and/or prominence commitments
from the Caliplay Group for the software products which the Playtech Group
currently provides (excluding sports) for varying periods of up to five years.

 

Further, and in consideration of the Playtech Group affording the Caliplay
Group more flexible terms (including as regards exclusivity) than under the
current software and services arrangements, Cali Interactive has agreed to pay
the Playtech Group additional fees of US$140 million phased over a four-year
period with US$12 million due to be received shortly following closing, and
the balance to be paid in 16 equal quarterly instalments of US$8 million.

 

The Caliplay Group has also agreed to provide certain capped revenue
protections to Playtech for a five-year period until 31 December 2029 in the
event of a migration away from certain software products of the Playtech
Group. To the extent that Playtech has otherwise received certain minimum
returns (whether through B2B software fees or dividends as a 30.8%
shareholder) in a relevant year, these revenue protections shall not apply.

 

The Playtech Group will no longer receive the additional B2B services fee and
will cease to be obliged to provide certain services to which those fees
relate but will continue to make available other customary B2B ancillary
services to the Caliplay Group, the majority of which will continue to be
charged on a cost plus basis as is the case currently. These services are
expected to be relatively limited in scope.

 

Financial implications

The revised agreement with Caliplay sets a strong foundation for the medium
and long-term growth of the business, and for the cash flows which are
expected to be generated for Playtech. However, the overall impact of the
revised strategic agreement is likely to result in total cash flows received
by Playtech in 2025 being lower than under the terms of the current agreement.
Based on our assumptions for Caliplay's ongoing operations, as well as around
the potential quantum and timing of dividend payments from Cali Interactive,
Playtech anticipates that total cash flow relating to Caliplay is likely to be
approximately €30 million - €40 million lower for 2025, versus 2024 on a
normalised basis.

 

While the accounting treatment for certain of Playtech's receipts from the
revised agreement is broadly agreed, some items are still being finalised and
so will be communicated in due course and once settled. Playtech plans to
update its previous medium-term B2B Adjusted EBITDA target (€200-250
million) at that time, to take account of the cash flows which will be
received (including through dividends) under the revised strategic agreement
with Caliplay.

 

Conditions and closing

The revised arrangements are subject to COFECE, the Mexican anti-trust
authority's approval. This is expected to take up to approximately six months
and closing is currently expected in Q1 2025.

 

- ENDS -

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