It was announced earlier today that online trading services provider Plus500 Ltd. is to be purchased by gaming software developer Playtech plc for the amount of $703 million (£460 million).
Two weeks ago, Plus500 was ordered by the UK Financial Conduct Authority to freeze the trading accounts of its customers as part of anti-money-laundering checks that commenced in the beginning of 2015. This resulted in the brokerage firm’s shares plunging more than 50%.
Last week, Gal Haber, Chief Executive Officer of Plus500, commented that the FCA appeared to have found “major failings” in the way the company gathered information about its customers’ financial position and proof of residence.
The difficulties the company has been facing recently led to various hedge funds such as Cable Car Capital and Valiant Capital Management predicting that its shares will further fall in value. Yet, billionaire Crispin Odey, founder and owner of Odey Asset Management, increased his stake in Plus500 from 19.6% to 21.33% after its shares declined.
Earlier today, Playtech announced that it is to pay 400 pence per share for the online brokerage firm. However, Mor Weizer, Chief Executive Officer of the gaming software developer, said during a call with investors that the takeover might not take place, in case “certain material adverse change” that affects Plus500’s business occurs.
Mr. Weizer also pointed out that Playtech placed its bid for the online trading services provider a week ago. When Aviva Plc fund manager Simon Young asked him as to whether the past week has been long enough for Playtech to carry out all the necessary due diligence processes, despite the ongoing regulatory investigation, the executive answered that all checks have been completed and they “feel comfortable that this is the right transaction” for them.
Last week, Plus500 commented that its British business has dropped by about $4 million over the past fortnight. It also pointed out that its revenue will probably be lower than what was generated back in 2014. In addition to this, the company needs to improve its compliance systems, a process which is estimated to cost about $2 million and to take about a month or so.
Mr. Weizer said today that the purchase of Plus500 will certainly be a good thing for the company and will help it solve its problems more quickly.
According to initial information, the acquisition deal is expected to be completed by the end of this year’s third quarter. Furthermore, Teddy Sagi, founder and largest shareholder in Playtech with a 33.6% stake, is to vote in favor of the purchase.
The potential acquisition of Plus500 will not be Playtech’s first foray into the world of online trading, as the gaming software developer bought online forex trading platform TradeFX for the amount of €208 million ($224 million).
TradeFX is known to have quite a strong business in contracts for difference (CFD), a type of trade that allows people bet on different shares or currencies. By purchasing Plus500, which is currently UK’s second largest CFD provider, and combining it with TradeFX, Playtech is planning to establish a profitable online trading business. Ron Hoffman, Chief Financial Officer of Playtech, is to be appointed as head of the expanded financial operations.
