Playtech signs German JV with Gauselmann

RNS Number : 0453W

Playtech Limited

24 January 2012

 



Playtech Limited

('Playtech' or the 'Company')

Announcement of German Joint Venture and Licensing Agreement

Playtech signs agreements with leading German gaming group, Merkur-Gauselmann

Playtech, (AIM: PTEC) the international designer, developer and licensor of software and services for the online, mobile and land-based gaming industry, is pleased to announce that it has signed a joint venture agreement with Merkur Interactive GmbH, the online division of the Gauselmann Group. The agreement provides for the joint development of an online gaming operation focused on new opportunities as the German online markets regulate, together with a related software licensing agreement.

Summary

§ Long-term equal joint venture with Gauselmann, owner of Germany's leading gaming brand, Merkur

§ Joint venture formed in advance of expected revisions to German online gaming regulations

§ Partnership will offer broad-based gaming and sports betting products and services, where permitted

§ Initiative in line with stated strategy of expanding joint venture and acquisition activities in regulated markets

Gauselmann

Founded in 1957, Gauselmann has developed its laughing Merkur sun into the most recognisable German domestic gaming brand.  With group revenues in excess of Euro 1.5 billion in 2010 and over 6,000 employees, Gauselmann is one of Europe's leading gaming groups.

Gauselmann has operations across Germany focused on the development and production of amusement and gaming machines and related gaming content, along with over 200 gaming arcades operated by its Merkur Spielothek division.  Internationally, it operates more than 200 gaming arcades in ten European countries and has a global distribution capability for its Merkur Slot/VLT machines and related gaming content.  Gauselmann has additional interests including a retail and online sports book capability in Italy with over 75 shops; and a controlling shareholding in the UK-based games developer, Blueprint. 

Joint venture

The agreement to set up the joint venture is in advance of expected changes to German gaming regulations.  This will enable the joint venture to prepare for the expected regulatory approval process where it will seek to be granted an online gaming license as soon as regulatory developments permit.

The proposed business activities will encompass online sports betting, gaming and gambling products which are regulated by the appropriate authorities in Germany. The joint venture will apply for specific regulatory license dependent upon each territory and gaming activity.

Playtech will inject marketing knowhow, affiliate marketing contacts and certain German-focused marketing managers from its PTTS services division.  This will be in addition to providing online gaming technology and its market leading player management system under a separate software license. Gauselmann will provide exclusive online rights to its Merkur and Gauselmann gaming brands along with related infrastructure and business relationships.

The capital requirements and financial return profile of the business will be highly dependent on the regulatory and fiscal regime developed in Germany.  Substantial working capital requirements for the operations are expected as soon as the market regulates and will from then on be shared equally between the two partners.  It will comprise predominantly first-year marketing spend for player acquisition and player retention. It is however expected that the venture will become self-financing within 18 months and subsequently deliver significant returns to each partner principally by way of cash dividends.

While Gauselmann will hold a technical controlling interest of 50.01 per cent, the partners have agreed to equal board representation and the expectation is that the joint venture will be a long term relationship.  No formal call option exit structures are envisaged, other than under than normal rights of pre-emption, and except in limited circumstances, transfers would not be permitted until at least the end of 2019.

German regulatory environment

The regulatory environment in Germany is likely to remain uncertain until a revised Interstate Gambling Treaty or other regulations is enacted, or alternate legislation put in place. Ministers have indicated that they are contemplating an opening of the online sports betting market in 2012, although clarity on the fiscal regime and whether certain additional online gaming products will also be permitted has not yet been achieved.

Mor Weizer, CEO of Playtech commented:

"We are delighted to be able to announce this significant joint venture with the leading German gaming brand.  Gauselmann and their Merkur brand are universally renowned throughout Germany and will provide a fantastic springboard for the business once regulations permit online activity.  While the regulatory and fiscal environment remains uncertain, it is clear that a partnership between Playtech and Gauselmann can deliver a combination of market leading capabilities which has the potential to achieve a significant market share, however the market regulation develops. 

"A joint venture structure was viewed by both parties as being the best way to achieve their strategic goals and has the potential deliver significant returns to both shareholders.  This transaction also clearly delivers on our indications of the likely form of our joint ventures, and with a partner of the quality of Gauselmann it can be seen to be validation of the PTTS acquisition in March 2011 which made this opportunity achievable.

Dr. Dirk Quermann, CEO of Merkur Interactive, commented:

"As a distribution channel, the internet undeniably provides a wide range of opportunities for us - this equally applies to gaming and cash winning games. Due to the prevailing legal framework, it has hitherto been impossible in Germany to offer domestically such games online. If, however, the domestic legislation on Gambling is amended, and allows for regulatory change to such conditions and enables commercially attractive operations, we will of course commit ourselves accordingly.

In Playtech we found the right partner to work with to provide a successful offer for the German online market - even in the face of tough competition of international gaming groups. The joint venture will be able to particularly benefit from the high awareness level of our brand, where the logo of the smiling Merkur sun is the most popular gaming symbol in Germany, our first class games, as well as Playtech's profound experience and comprehensive technical and especially marketing know-how in the field of internet gaming."

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Further information

Playtech Ltd Mor Weizer, Chief Executive David Mathewson, Chief Financial Officer c/o Pelham Bell Pottinger Ross Hawley, Director of Investor Relations	[phone] [phone]
Collins Stewart 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 Group'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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