Settling Mexican dispute is big win for Playtech

Playtech has lifted its core profit forecasts above market expectations and reached a settlement in a long-running dispute with a Mexican sports betting firm, sending its shares sharply higher.
The FTSE 250 gambling technology company, which said earnings before deductions would be higher in the current financial year due to a strong performance from its business-to-business division, signed a revised agreement with Grupo Caliente over their joint operation Caliplay.
After a lengthy dispute in which the Mexican company withheld money, Playtech said that Caliplay has resumed paying software and licence fees, with more than €150 million — representing about 80 per cent of the outstanding fees —already received.
Playtech will hold a 30.8 per cent equity interest in Caliente Interactive, the new US-incorporated holding company of Caliplay.
In addition, the Mexican business will pay a further $140 million over four years. The revised arrangements are conditional upon Mexican antitrust approval and closing of the deal, which is expected in the first quarter of 2025.
Mor Weizer, chief executive of Playtech, said: “The revised arrangements mark the beginning of an exciting new chapter that will build on impressive progress to date, with a view to driving significant further growth for Cali Interactive in the future.
“The agreement with Caliente and Caliplay underlines the attractiveness of Playtech’s leading proprietary technology.”
Analysts at Peel Hunt welcomed the update from Playtech and raised their estimate for full-year earnings before deductions by €25 million to €475 million, citing “strong trading”. They also raised their target price for the stock from 700p to £10.
Shares in Playtech closed up 99p, or 15.1 per cent, at 753p.
“While the [Caliplay] dispute was ongoing, there was a risk that the cash flow from Mexico would stop entirely, materially undermining the profit of the group,” Peel Hunt said.
Last month Playtech disclosed that it was in talks with Flutter Entertainment, the owner of Paddy Power and Betfair, regarding a potential £2 billion sale of Snaitech, its Italian betting company.
Playtech confirmed that discussions were continuing but said that “there can be no certainty that any transaction will ultimately be agreed”.
The potential sale of Snaitech, which leads market share in Italy, would leave Playtech positioned solely as a business-to-business provider of gambling software.
Peel Hunt said: “With Flutter having recently announced an acquisition in Brazil, we believe it should soon become clear whether it can agree terms with Playtech for the acquisition of Snaitech. We believe that it will and this is the basis for our valuation of Playtech.”
In December last year it was revealed that the William Hill owner Evoke, then named 888 Holdings, had rejected a £700 million takeover offer from Playtech.
Playtech, founded in 1999 by the Israeli entrepreneur Teddy Sagi, supplies software and games to gambling operators in 19 countries.
The company launched its first casino product in 2001 and was listed on the London Stock Exchange in 2006 with a market valuation of £550 million. Sagi, who owns Camden Market, in London, sold his remaining shares in 2018, having gradually reduced his holding over previous years.
Playtech is due to release its interim results on September 30.