Four days before it is due to reveal its interim results for 2022-23, gaming machine company Aristocrat Leisure has made another attempt to get deeper into the online real money gaming business.
Aristocrat told the ASX on Monday that it plans to purchase Nasdaq-listed (but Luxemburg-based) gaming software firm NeoGames for $1.5 billion (around $US1 billion), via cash offer of $US29.50 per share to acquire 100% of NeoGames.
That’s more than double (104%) the pre-bid average of $US14.45, according to Aristocrat’s bid details.
The large premium is a sign that Aristocrat must have been worried about shareholder opinion about the richness of this deal – why else would it reveal its on-market share buy-back program had been increased by up to $500 million?
Once done, the deal will give Aristocrat an entry into the online lottery market and provide it with global scale. Including debt, Aristocrat said NeoGames has an enterprise value of $1.8 billion.
This deal comes 14 months after Aristocrat Leisure’s $A5 billion bid for gambling software company Playtech fell through on Wednesday after the British firm’s shareholders rejected the proposed buyout. Aristocrat couldn’t get the required percentage of Playtech’s shareholder to vote yes to overcome the opposition.
NeoGames is a smaller player but there seems to be more scope for growth than with the larger Playtech.
Aristocrat has played the long game in wanting to get into this market – after Playtech rejected its bid, the Australian company made no secret of its ambitions in this area and told investors it would wait for the right deal to come along.
The bid will be funded out of existing cash reserves – the $1.3 billion raised in late 2021 to help fund the Playtech takeover.
The bid was won the support of the NeoGames board and according to Aristocrat, the board has recommended that NeoGames shareholders vote in favour of the acquisition.
NeoGames shareholders who hold a total of approximately 20.4 million shares, representing approximately 61% of NeoGames’ outstanding shares, have also executed an agreement pursuant to which they will vote in favour of the Acquisition,” Aristocrat said on Monday, thereby ruling out the chances of the deal being killed off by a rump of NeoGames shareholders
NeoGames is described as a global leader in content and technology solutions for the online RMG industry, with the full-service suite including content, proprietary technology platforms and a range of value-added services across iLottery, iGaming and Online Sports Betting.
Aristocrat says the company currently has around 1,100 staff and more than 200 customers across more than 50 regulated markets.
Aristocrat explained that the acquisition delivers on its online RMG (real money gaming) strategy and accelerates growth by immediately positioning the company with global scale and capability, with a “particular opportunity for expansion in the large, growing and still relatively nascent North America segment, as well as more broadly across Europe and Rest of World markets.”
Last September it bought UK RMG supplier, Roxor Gaming which was tucked away in Aristocrat’s online RMG business, Anaxi that was set up after the Playtech deal fell over.
Aristocrat CEO Trevor Croker said on Monday, “Bringing together NeoGames and our growing Anaxi business will position Aristocrat with global scale and capability in the growing online RMG industry.
“Through the acquisition of NeoGames and its industry-leading global online RMG platform, this transaction will deliver on our strategy by providing a portfolio of end-to-end solutions for iGaming, iLottery and Online Sports Betting operators globally. We see great opportunities in the combination of our complementary businesses, with clear revenue and growth potential that comes with a complete and seamless online RMG solution.
Aristocrat shares rose 2.1% to $39.51 after being in the red earlier in the session. Investors weren’t all that impressed by the deal or the increased buyback but then warmed to the idea after a briefing from the company.
