The acquisition represents a valuation multiple of 11.4x Playtech’s adjusted EBITDA for the twelve months ended 30 June 2021.

The Playtech Board considers the terms of the Acquisition to be fair and reasonable and has unanimously recommended that Playtech shareholders vote in favour of the Scheme. Playtech directors who own Playtech shares have irrevocably undertaken to vote in favour of the Scheme.

Aristocrat has received letters of intent or irrevocable undertakings from Playtech shareholders, including from Playtech’s largest shareholder (as at 30 September 2021), to vote in favour of the scheme in respect of a total of approximately 63.4 million shares, representing approximately 20.7% of Playtech’s outstanding shares.

The Acquisition will be conservatively funded by a combination of existing cash, a new Term Loan B issue and an equity raising.

Playtech is a leading technology provider that develops platforms and content for the global gambling industry. It is considered by Aristocrat to be one of the world's largest online gambling software suppliers and has built a strong track record of pioneering content, software, and platform technology development for the gambling industry. Playtech has more than 7,000 employees across 24 countries, 170 global licensees and is regulated in 30 jurisdictions.

Operationally, Playtech consists of two key business segments: Business-to-Business gambling (“B2B”) and Business-to-Consumer gambling (“B2C”). Playtech’s B2B gambling operations include the design, development, and distribution of software and services to the online and land- based gambling industry. It covers all key online real-money gaming (“online RMG”) segments, including casino, live casino, poker, bingo and sports betting, monetising via a revenue share model. Playtech’s B2C gambling operations predominantly consists of Snaitech (Italy), a vertically integrated retail and online business leveraging Playtech’s proprietary technology and capabilities. As a leading Italy-based multi-channel gaming operator, it is free of any meaningful channel conflict with Aristocrat’s existing operations. Other B2C brands include HPYBET and SunBingo. HPYBET is Playtech’s retail sports betting B2C business, operating betting shops in Austria and Germany.

Playtech also has a financial services business, Finalto, which is currently in the process of being divested to Gopher Investments. The sale of Finalto is conditional on the approval of certain regulatory authorities in relation to the change of control of Finalto and approval by Playtech shareholders at a general meeting of Playtech expected to be held in December 2021.

Strategic rationale

The Aristocrat Board believes that the Acquisition will accelerate Aristocrat’s growth strategy and deliver strategic benefits. In particular, the Acquisition will: 

• provide Aristocrat with material scale in the ~US$70 billion online RMG segment, offering new, complementary growth channels for Aristocrat’s gaming content;


• deliver medium-term revenue and earnings growth, in particular in the fast-growing North America online RMG segment, combining Aristocrat’s industry leading gaming content and long-term customer and regulatory relationships with Playtech’s technology and platform;


• enable Aristocrat to meet a broader range of customer and player needs and deliver new and connected experiences through Aristocrat and Playtech’s combined distribution, technology and content, unlocking additional value across Aristocrat’s portfolio and deepening customer engagement;


• through Playtech’s Snaitech business, enable Aristocrat to operate and innovate in multiple European markets, across the entire value chain and free of channel conflict; and


• deliver attractive financial returns, with the acquisition expected to be EPSA accretive in Aristocrat’s first full year of ownership.

Aristocrat CEO and Managing Director, Trevor Croker, said: “The proposed combination would bring together Aristocrat’s world-class gaming content and customer and regulatory relationships with Playtech’s industry leading global online RMG platform (B2B) and European B2C footprint.”

“The combined Group would offer a broad portfolio of end-to-end solutions for gamingcustomers around the world, as well as seamless player experiences, underpinned by a shared focus on responsible gameplay and innovation.”

“Additionally, the business will be ideally positioned to unlock sustainable shareholder value by seizing opportunities in the fast-growing global online RMG segment as they continue to open up, particularly in North America.”

“The recommended offer is a full and fair value and reflects the strategic potential of the combination in a global gaming sector that continues to migrate online, as a result of technology and entrenched consumer-driven change.”

“Adding Playtech’s talented team with Aristocrat’s established strengths and momentum will create a true industry leader in the global online RMG space, particularly in terms of our B2B capabilities.”

“The proposed acquisition continues Aristocrat’s approach of investing in medium to long-term growth and we are extremely excited by the opportunities that this will bring for our shareholders, people, customers and players” Mr. Croker concluded.

Funding

Aristocrat expects to fund the Acquisition with:

• A$1.1 billion (US$0.8 billion) existing cash held by Aristocrat;


• a US$2.05 billion (A$2.8 billion) Term Loan B (“TLB”) issuance to be conducted prior to completion of the Acquisition; and


• a A$1.3 billion equity raising by way of an underwritten pro rata accelerated renounceable entitlement offer with rights trading ("Entitlement Offer"), to provide the fairest possible structure for Aristocrat shareholders.

Aristocrat expects to maintain a strong balance sheet post Acquisition with pro-forma net debt to EBITDA expected to be less than 2.5x at completion of the Acquisition. This conservative funding strategy will allow Aristocrat to continue to financially support its strategy and Aristocrat expects to pay a final FY21 dividend.

An Interim Facilities Agreement ("IFA") is in place to ensure Aristocrat has committed financing available to pay the cash consideration to Playtech shareholders, as required under the UK Takeover Code.

Financial impact

The Acquisition is expected to be mid to high single digit EPSA accretive in the first full year of ownership (expected to be Financial Year ended 30 September 2023) including cost synergies and the estimated impact of the combined group potentially exiting from certain jurisdictions which may not be consistent with Aristocrat’s risk appetite and approach to compliance.

On the same basis, but excluding the impact of cost savings, the Acquisition is expected to be low to mid single digit EPSA accretive.

Following completion of the Acquisition, Aristocrat intends to conduct a review of the jurisdictions in which Playtech operates, and the nature of Playtech’s business in those jurisdictions, to determine alignment with Aristocrat's risk appetite and approach to compliance. If the review concludes that continuing operations in certain jurisdictions is not consistent with maintaining the existing regulatory licences of the combined group, the combined group may exit certain jurisdictions. Based on due diligence, Aristocrat has estimated that the jurisdictions that it anticipates will be the focus of this review contributed EBITDA of approximately €50-€80 million (A$ 78-125 million) for the year ended 31 December 2020, and the EBITDA contributed by these jurisdictions (which could vary from the estimated figures above) may be significantly reduced or eliminated entirely.

While the basis for the Acquisition is to enhance the medium-term growth potential of Aristocrat rather than generating cost synergies, Aristocrat expects to achieve operating cost and scale benefits across the combined group typical of transactions of this size, which are expected to include public company costs savings. The anticipated cost savings are not expected to fully offset the impact of Playtech exiting certain jurisdictions as a result of the review outlined above.

Refer to the 2.7 Announcement (a copy of which is attached to this announcement) for more information on the post completion review proposed to be undertaken by Aristocrat.

Conditions of the Proposal

The Acquisition remains subject to the conditions and further terms including:

• the approval of the Scheme by a majority in number of the Playtech shareholders who are present and vote, whether in person or by proxy, at the relevant Playtech shareholder meeting and who represent at least 75 per cent in value of the Playtech shares voted;


• the necessary resolutions being duly passed by the requisite majority of Playtech shareholders at the relevant Playtech shareholder meeting;


• the sanction of the Scheme by the Isle of Man Court (with or without modification but subject to any modification being on terms acceptable to Aristocrat and Playtech);


• in connection with the framework agreement and software licensing agreement entered into between Playtech and Caliente and its wholly owned subsidiary Caliplay, there having been no (i) waiver or amendment or restructuring of that agreement or waiver or granting or exercise of any option, call, put or right of exchange or conversion under that agreement, or (ii) exercise of any option, put, call or right of exchange or conversion under that agreement, or (iii) entry into any non-compete or exclusivity restrictions, in each case which would restrict the ability of any member of the Playtech group or the Aristocrat group to operate in the Mexican and/or North American markets and which might be material and adverse to the Aristocrat group or the Acquisition;


• the approval of the disposal of Finalto by Playtech shareholders and there having been no material and adverse amendments to the terms of the agreement to dispose of Finalto; and


• certain antitrust, foreign investment, gaming regulatory and financial regulatory consents and approvals being obtained, as set out in more detail in the 2.7 Announcement attached.

The Acquisition is expected to be completed during Q2 2022, subject to satisfaction of the conditions precedent.

Full details and terms and conditions of the Acquisition will be set out in a Scheme Document to be sent to Playtech shareholders, who in turn will be given the opportunity to vote on the Scheme at a shareholder meeting expected to be scheduled in December 2021.

Entitlement Offer

As part of the proposed funding for the Acquisition, Aristocrat is undertaking an underwritten 1 for 20.56 pro-rata accelerated renounceable entitlement offer with retail rights trading (“Entitlement Offer”) at a price of A$41.85 per new share (“Offer Price”).

The Offer Price represents:

• a 8.2% discount to the theoretical ex-rights price (TERP) of A$45.61; and


• a 8.6% discount to the last close price of A$45.79 on the ASX on 15 October 2021.

The Entitlement Offer will raise A$1.3 billion, and has been structured to deliver fairness to all eligible shareholders. The Entitlement Offer comprises:

• an institutional entitlement offer: eligible institutional shareholders will be invited to subscribe for a pro-rata number of new shares. Under the institutional entitlement offer, eligible institutional shareholders can choose to take up all, part or none of their Entitlement. Entitlements not taken up, along with entitlements of ineligible institutional shareholders, will be sold under an institutional shortfall bookbuild and any proceeds in excess of the Offer Price will be paid to the relevant shareholders; and


• a retail entitlement offer: eligible retail shareholders with a registered address in Australia or New Zealand will be invited to subscribe for a pro-rata number of New Shares. Eligible retail shareholders who wish to apply to participate in the retail entitlement offer must do so by 5:00pm (Sydney time) on 8 November 2021. Eligible retail shareholders may also sell their entitlements on ASX, with trading to commence on 21 October 2021 and conclude on 1 November 2021. Retail entitlements not taken up, along with entitlements of ineligible retail shareholders, will be sold under a retail shortfall bookbuild and any proceeds in excess of the Offer Price will be paid to the relevant shareholders.

Eligible retail shareholders should carefully read the Retail Offer Booklet which is expected to be made available online only at www.aristocratoffer.com.au from 25 October 2021.

EntitlementOffertimetable¹

1 The Entitlement Offer dates and times are indicative only and subject to change. Aristocrat and the underwriters reserve the right to vary the dates and times of the Entitlement Offer, which includes closing the Entitlement Offer early, without prior notice. All times and dates in the Entitlement Offer timetable refer to the time in Sydney, Australia.

Further Details – Entitlement Offer

Further details of the Entitlement Offer are set out in the accompanying Investor Presentation also announced to the ASX today. The Investor Presentation contains important information including key risks and foreign selling restrictions with respect to the Entitlement Offer.

Aristocrat Trading Update

Aristocrat today also announces trading update for the FY2021 fiscal full year as follows:

NPATA of A$864 million implies 81% growth on FY2020 fiscal year and reflects:

• enhanced market leading positions in Gaming Operations, measured by installed base (~54k), game performance and industry leading fee per day (“FPD”) of ~US$51;


• sustained growth in floor share across key Gaming Outright Sales markets globally, despite some regional lockdowns (e.g. ANZ);


• digital bookings up ~14% on FY20 to ~US$1.84 billion with User Acquisition ("UA") expected to be at the top end of the historic range of 25% and 28% of overall Digital revenues;


• average bookings per daily active user (“ABPDAU”) increased 25% from US$0.59 in FY20 to US$0.74 in FY21;


• continued D&D investment to drive sustained, long-term growth, with investment up in absolute dollars, and consistent with historic levels, on a percentage of revenue basis;


• increasing SG&A across the business, as we continue to scale, invest in and deliver on our growth strategy. This includes continuing to identify adjacencies that expand our capabilities to create new business and growth through product, distribution and investment (including M&A);


• no change in previous guided non-operational item ranges (interest expense, amortisation of acquired intangibles, normalised effective tax rate); and


• maintained strong operating cash flows, cash balance of approximately A$2.4 billion and a robust balance sheet with net debt/EBITDA of 0.5x.

Whilst the FY2021 full fiscal year results are subject to audit, the trading update reflects normalisation adjustments on consistent basis with prior years and is not impacted by material change in provisions.

Investor Conference call

Aristocrat Managing Director and CEO Trevor Croker, Aristocrat CFO Julie Cameron-Doe and Aristocrat Gaming CEO and Chief Transformation Officer Mitchell Bowen will host a conference call at 10.30am (Sydney time) this morning in relation to this announcement. The presentation has been lodged with the ASX separately to this announcement.

To register to access the conference call please click on the link to the Aristocrat Leisure Limited Group website https://ir.aristocrat.com/

Authorised for lodgement by the Aristocrat Leisure Limited Board of Directors.