Playtech Mulling Further Affiliate Acquisitions

Mor Weizer, the chief executive of Playtech Ltd., said this morning that the company is considering acquiring additional affiliate businesses from its founder, Teddy Sagi, who, previously, has graced Forbes magazine's list of Israel's 40 richest people.

Last month, Playtech agreed to acquire two affiliate companies controlled by Mr. Sagi, Uniplay International Ltd. and Six Digits Trading Ltd., for $250 million.

The acquisition is expected to be completed in January 2009, upon which the affiliates will be transferred to William Hill for the creation of William Hill Online; in return, Playtech will receive a 29 percent share in that company.

"As soon as we will integrate it" -- Mr. Sagi's affiliate companies with William Hill -- "we will consider moving to the other options we have, to the other affiliated companies that we have," said Mr. Weizer, who was speaking on the company's third-quarter analyst call.

Quarterly revenue from casino and poker grew markedly year over year, and total revenue, 28.4 million euros, was up 67 percent. The company has changed its reporting currency from United States dollars to euros, it said, because nearly three-quarters of its revenue now derives from Europe.

Quarter on quarter, casino revenue, which came in at 20.5 million euros, was up 5 percent while poker revenue, 7.5 million euros, was up 9 percent.

Across the first nine months of the year, total revenue was up 78 percent to 80 million euros, casino rose 75 percent to 57.3 million euros and poker grew 88 percent to 21.5 million euros.

Asked during the call whether operating margins would indeed reach 70 percent this year, Mr. Weizer declined comment. Mr. Weizer suggested in May on the company's first quarter results that margins could move "towards 70" by yearend.

Commenting on the company's intention to acquire more businesses from Mr. Sagi, Ivor Jones, an analyst at Evolution Securities in London, wrote in a note yesterday: "We find this discouraging because 1) a knowledgeable and astute investor (Mr. Sagi) is cashing in 2) it will require an equity issue or absorb the group's free cashflow for much of the next 17 months and 3) because we have no visibility on the business being acquired."

As of Sept. 30, 69 percent of Playtech's business derived from Europe, 25 percent from the Asia-Pacific region and 6 percent from the rest of the world.

The company said average daily online revenue during October was up 10.6% on the third quarter. November daily online revenue, it added, is up on October.