Playtech's acquisition of Plus500 scrapped

Playtech has announced the proposed acquisition of Plus500 has been scrapped, with a second proposed deal for Ava Trade hanging in the balance.

The FTSE 250 gaming company announced on Monday that it received an update from the Financial Conduct Authority (FCA) late on Friday with a number of concerns.

Playtech said it previously believed it could resolve all previous concerns the FCA had.

But after considering the latest letter it said the steps it would need to take to address concerns would not “sufficiently satisfy the FCA” to get approval by the 31 December deadline and pulled the plug on the acquisition.

As a result, and with the Central Bank of Ireland (CBI) opposing it, Playtech said there’s now an increased risk of its proposed acquisition of Ava Trade not going through.

The CBI’s opposition in October triggered a termination right for Ava Trade’s sellers, but they haven’t exercised this right to date.

Playtech said it continues to appeal CBI’s opposition to the deal and it is in the process of evaluating what to do with its “significant” cash balances following the termination of the Plus500 acquisition.

Canaccord Genuity’s Simon Davies said it is clearly disappointing considering the strategic growth opportunities within the online financial trading sector.

“We strip out both Plus500 and AVA Trade from our forecasts, and as a result, our FY15 Ebitda forecast coming down from €256.5m to €245.1m, reducing EPS from 63.3c to 60.2c.”

However Davies noted there is a positive for shareholders.

“Given the absence of these deals, Playtech will now have estimated FY15F year end net cash of €995m, with scope for value accretive deals or returns of cash to shareholders.”

Meanwhile, the company also noted its gaming division continues to enjoy double-digit underlying growth, while it is committed to growing its financials division.