Israeli Bank, Insurance Firms Mull MBO Bid for Playtech’s Financial Unit

An Israeli bank and two insurance companies are reportedly looking to join forces and bid together for the financial unit of gambling technology giant Playtech.

Israeli news outlet Calcalist reports that Bank Leumi’s investment arm, Leumi Partners, is reportedly in talks with local insurance firms Menora and Phoenix to potentially form an alliance and bid jointly for Playtech’s TradeTech division.

According to sources familiar with the ongoing discussions, if the Israeli bank and the two insurance companies reach an agreement they will then partner up a recently formed group comprising investment fund Fortissimo Capital and entrepreneur Zvika Barenboim.

Following media reports, Playtech confirmed late last month that it was “in discussions with a number of parties regarding a sale of its financial division. The company further said in a statement on its official website that those discussions were at an early stage and that “there can be no certainty that any transaction will be forthcoming or whether acceptable terms will be agreed.”

Playtech formed its TradeTech unit in 2017 after the purchase of CFH Group in 2016 in a $120 million transaction and after spending another $150 million for FX and CFD market maker Alpha Capital Markets. The gambling technology provider then combined those two with its retail FX brokerage arm Markets.com.

Management Buyout Under Consideration

Calcalist reports that each of the newly emerged bidders would receive between 10% and 15% of TradeTech, should Playtech agree to sell its financial arm to the group of interested potential buyers.

According to previous reports, Fortissimo and Mr. Barenboim pursued a 60% stake in the company, with the remaining 40% to be held by institutions.

The group of new bidders is understood to be considering the idea of a management buyout where TradeTech’s current managers would acquire 10% of the company. This would allow for a smoother switch of ownership and a shorter due diligence process.

Completion of the alliance between Leumi Partners and Menora and Phoenix is subject to approval from each of the three entities’ boards of directors. They are expected to vote on the matter when and if Playtech accepts the group’s offer.

The gambling technology company has tapped UBS Investment Bank to advise it on a possible sale of TradeTech. Playtech is understood to be asking for an initial bid of between $200 million and $250 million.

The company said in August that TradeTech performed exceptionally during the first half of the year, especially after the coronavirus crisis hit and prompted market volatility and trading volumes to soar. The financial unit generated EBITDA of over €45 million in the four months to April 30, 2020, a significant improvement on 2019’s full-year EBITDA of €7.9 million.

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