Completion of related party transactions

RNS Number : 1388F

Playtech Limited

12 June 2012

 



Playtech Limited

('Playtech' or the 'Company')

Announcement of software licence agreement, lease of premises and

advisory services agreement with related parties

Playtech Limited, (AIM:PTEC) the international designer, developer and licensor of software and services for the online, mobile and land-based gaming industry, announces the completion of three related party transactions previously announced to the market.

Summary

The transactions comprise:

§ a software licence agreement providing the Company with a wide range of both social gaming software and real money software, primarily focussed on the rapidly expanding social gaming market and strengthening the Company's mobile gaming product range respectively;

§ two 10 year leases of premises in London occupied by the Company's subsidiary, Gaming Technology Solutions Limited ("GTS"); and

§ an advisory services agreement between the Company and Mr Teddy Sagi

Each transaction has been entered into ahead of, and in preparation for, the intended move to a Premium Listing on the Main Market of the London Stock Exchange ("Premium Listing").

Each of the transactions constitute a related party transaction under Rule 13 of the AIM Rules for Companies ("AIM Rules") as the counterparties are Mr Sagi or entities in which he has a beneficial interest and the value of the transactions must, in accordance with Rule 16 of the AIM Rules given that Mr Sagi, through Brickington Trading Limited, is beneficially interested in 48.3% of the issued share capital of the Company, be aggregated with the acquisition of PT Turnkey Services Limited from entities in which Mr Sagi is beneficially interested and which completed on 30 June 2011.

Software licence agreement

The Company announces that, as indicated in its Q1 KPI statement on 2 May 2012, it has entered into a software licence agreement with Skywind Holdings Limited ("Supplier"). The agreement provides Playtech with a wide range of both social gaming software and real money software, primarily focussed on the rapidly expanding social gaming market and strengthening the Company's mobile gaming product range respectively.

Social gaming has experienced significant growth over the last two years and is now a multi-billion dollar market with revenues generated in a number of ways, including the real money purchase by end users of social currency such as Facebook credits. Playtech has been monitoring developments in the social gaming arena closely, analysing a number of ways to enter the market. Current licensees and third party brand owners are seeking to leverage their online gambling assets and skills into this attractive model. The software licence agreement provides the Company with access to a broad range of social gaming platforms and products in addition to complementary real money products giving Playtech a unique position in the market. The Directors believe that the combination of Playtech's wide distribution channels, expertise in content development, backend and online marketing capabilities and the broad range of products licensed under the software licence agreement will position the Group as the leading B2B provider to the social gaming market. Playtech will have the ability to offer cross platform capabilities for a full suite of products, including social casino, poker, bingo and rummy.

These platforms and products are already deployed in a fast growing B2C social gaming operation with over 1.5 million monthly active users (MAU) combined and includes brands such as Slotsfarm and Raminoz. The incorporation of such an offering into the Company's core B2B business model will provide the potential for building a significant new stream of additional earnings to Playtech.

The software licence agreement will also provide the Company with exclusive access to significant complementary real money software which will supplement its existing market leading offering, particularly in relation to mobile casino and poker. The Directors view mobile as a key platform in the future growth of the sector as evidenced by the recent strong financial performance of mobile across the Company's licensee base.

The software licence agreement provides the Company with access to more than 150 developers whose primary focus is on social gaming solutions and real money mobile software. The software being licensed has a proven track record  in a fast growing B2C business on both social networks and Apple App Store and comprises:

Social gaming:

§ Social gaming platform including backend capabilities

§ Social poker software

§ Social casino and casino content software

§ Social rummy software

§ Social bingo software

Real money gaming:

§ Platform software including backend capabilities

§ Mobile poker software (both Native (iOS and Android) and HTML5)

§ Mobile casino software (both Native (iOS and Android) and HTML5)

§ Rummy software

§ Poker software

The principal terms of the software licence agreement are as follows:

§ Playtech is to be granted licences for the software referred to above (together with the right to certain ancillary development and social marketing services from the Supplier) for use in its core B2B business models and any future B2C business models adopted by the Company

§ The real money gaming software comprising the platform, rummy and poker is being licensed on a perpetual basis (the "Perpetual Software") and the remainder of the software, principally the social gaming and real money mobile software, is being licensed for an initial three year term (the "Non-Perpetual Software")

§ The overall licence fee paid by Playtech will be €6 million per annum plus a royalty fee of 20% of revenue generated through the use of the licensed software in social gaming activity during the term of the licence of the Non-Perpetual Software. No royalties are to be paid based on revenues generated from the use of the real money software

§ The licence of the real money software is exclusive on a forward looking basis for B2B for so long as the Non-Perpetual Software is licensed by Playtech. The Company expects to enter into a software licence in the short term with an established gambling operator in respect of certain of the real money software which would have an immediate impact in  offsetting the overall cost of the licence. Furthermore, the Supplier has agreed not to license the social gaming software to B2B competitors of the Company during any period where Playtech is licensing such software

§ The Company has agreed a mechanism with the Supplier for the extension of the licence of the Non-Perpetual Software for up to a further three years following the expiry of the initial three year period at no additional cost and on terms whereby exclusivity is preserved

§ The obligations of the Supplier under the software licence agreement are being guaranteed by Brickington Trading Limited

§ As part of the transaction, Playtech will grant the Supplier the right to use the Company's games content from its games library in the Supplier's B2C social gaming business on a royalty free basis (subject to consent, where relevant, of third party brand owners and the payment of certain charges in respect of branded content). The provision of such games content shall cease at the same time as the licence for the Non-Perpetual Software expires

§ Playtech has further committed, subject to entry into definitive legal documentation, to licence to the Supplier its gaming software for use in any future B2C real money operation of the Supplier on arms' length terms consistent with those generally offered to the Company's licensees

The Directors are confident that with the anticipated growth in the social gaming segment of the market coupled with the transferrable expertise of the Company into this arena and access to a development team with a proven track record, the financial terms of the software licence agreement represent an attractive and cost effective B2B entry point for Playtech, particularly when compared to the recent acquisitions undertaken by gaming companies of social gaming development groups and B2C social gaming operators.

The Company has identified significant potential in both the newly presented social gaming market and a cross-platform model with traditional real money gaming, with existing licensees and other third parties having expressed an interest in working with Playtech as part of their own entrance into the social gaming arena. With immediate effect, the Company will be devoting resources to launching a full B2B social gaming model in order to maximise the time to market advantage created by entry into the software licence agreement. It is anticipated that such investment and overall licensing costs will produce tangible results for shareholders over the medium term. 

The Directors, having consulted the Company's Nominated Adviser, Canaccord Genuity Limited, consider that the terms of the software licence agreement are fair and reasonable in so far as shareholders are concerned.

Leases of Camden premises

The Company announces that, as indicated in its Q1 KPI statement on 2 May 2012, its subsidiary GTS has entered into two 10 year leases (the "Leases") with Anise Developments Limited and Anise Residential Limited ("Anise") for approximately 10,000 sq ft of modern, fully fitted-out office space and nine furnished apartments at Jamestown Road, Camden, London at an aggregate rent of £750,000 per annum. The leases both contain an upwards only rent review after the fifth year.

The premises are in a new development fitted out to GTS's high specification. GTS has benefitted from rent free occupation of the premises since November 2011 and a tenant fit-out of the offices costing in excess of £350,000 and funded by Anise.

The Directors, having consulted with independent property agents with regard to the rental values of the office and residential premises and the Company's Nominated Adviser, Canaccord Genuity Limited, consider that the terms of the leases are fair and reasonable in so far as shareholders are concerned.

Advisory Services Agreement

The Company announces that it has concluded an advisory services agreement with Mr Sagi following the announcement of the intention to appoint Mr Sagi as an advisor to the Company on 17 April 2012.

Pursuant to the advisory services agreement and from 1 July 2012 Mr Sagi will provide strategic advice as the Company requests from time to time.  Mr Sagi will be paid a nominal fee of €1 per annum for the duration of his appointment as an advisor. The agreement will be terminable on the earliest of either party giving notice following the fifth anniversary of commencement and the date on which Mr Sagi ceases to be legally or beneficially interested in the share capital of the Company.

The Company is not obliged to involve Mr Sagi in any matter. However, the Directors recognise that, in certain circumstances, Mr Sagi's expertise in relation to aspects of the online gaming industry will prove valuable to the Company.

The Directors, having consulted the Company's Nominated Adviser, Canaccord Genuity Limited, consider that the terms of the advisory agreement are fair and reasonable in so far as shareholders are concerned.

Commenting on the transactions, Playtech's chief executive, Mor Weizer, said:

"Social gaming offers exciting growth opportunities for real money gaming organisations to apply their technological and marketing expertise. The Skywind software licence delivers a cost effective entry into social gaming, expanding Playtech's real money offering, especially its market leading mobile capabilities.

"Mobile and social gaming will lead the gaming industry's growth and present significant opportunities for the Company. With access to a sizable and proven development team Playtech will be able to maintain its position as the leading online gaming software provider. We will offer a comprehensive and innovative solution to online gaming operators wishing to access the social gaming market and strengthen their mobile offering. Similarly we will enable social gaming companies to access a full suite of products in social and real money gaming.

"I am pleased that GTS has been able to secure a long-term lease of modern premises fitted-out to its specifications which will be attractive to the IT and support teams located there.

"The advisory agreement concluded with Teddy Sagi will allow the Company to call on his expertise and entrepreneurial skills to harness future opportunities as they arise in our rapidly evolving marketplace."

- Ends -

For further information contact:

Playtech Ltd Mor Weizer, Chief Executive	[phone]
Cannacord Genuity Piers Coombs / Bruce Garrow	[phone]
Pelham Bell Pottinger David Rydell / Olly Scott / Guy Scarborough	[phone]

About Playtech

Playtech develops unified software platforms and content for the online and land-based gaming industry, together with providing a range of ancillary services such as marketing, hosting and CRM services.

Leading gaming applications include casino, poker, bingo, sports betting, live gaming, casual and fixed odds games. Playtech provides licensees with the tools to maximise cross-selling opportunities, player loyalty and yield, all through the powerful management interface - the IMS. The Company's capabilities enable the delivery of an integrated software or turnkey solution, with players accessing online, broadcast, mobile and server-based gaming terminals through a single account.

New licensees include existing online operators upgrading or diversifying their offering, land-based casino groups, government sponsored entities such as lotteries, and new entrants making their online gaming debut, particularly in newly-regulated markets.

Founded in 1999, Playtech has some 1,000 employees located in development centres in five countries, the majority of whom are engaged in research and development of current and future gaming technologies, together with 900 employees providing ancillary services

www.playtech.com

 

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