NetPlay TV acquires Vernons online gaming business from Sportech31st October 2013 8:04 am GMT
UK-listed operator and supplier of pools and tote betting services Sportech has sold its UK-facing online gaming business, Vernons.com, to live TV gaming specialist NetPlay TV for a total cash consideration of £3m.
The acquisition includes the brand, customer database of 367,000 players and various other gaming assets of Vernons.com, which operates a UK-facing online casino, bingo, poker and sports book.
NetPlay TV CEO Charles Butler said that the acquisition represents the acceleration of the company’s strategy to grow through both organic growth and strategic acquisitions.
“The acquisition, which will be immediately earnings enhancing, fits very well with the group's core business, adds scale and customer reach, and will be integrated quickly and efficiently to realise the excellent operational synergies,” said Butler. “We look forward to investing further in our proven marketing strategy for Vernons.com alongside our existing brands and continuing to drive value for shareholders.”
NetPlay will acquire Vernons.com for a total consideration of £3m, which will be satisfied in cash from the company’s cash resources. In addition, Sportech has agreed to contribute £0.1m towards NetPlay's restructuring and integration costs which will be settled in cash on completion.
NetPlay said that the “significant synergy opportunities” will ensure efficient integration and immediate profitability, with Vernons drawing the majority of its revenue from online casino, operating on the same Playtech software platform as NetPlay, and also having operations in Guernsey.
The acquisition provides NetPlay with further product differentiation, with the company planning to cross market its existing live roulette TV product by offering it to Vernons' customer database post integration. In addition, the company has signed a memorandum of understanding which will enable it to offer Sportech's football pools to NetPlay's customer base.
Last year, Vernons generated total revenues of £4.8m and an operating profit of £1.1m. For the first six months of this year, revenues amounted to £2.8m.
Sportech admitted that the Vernons business had faced a number of challenges in the past year and that the performance in 2013 to date had been “disappointing”. Brand and platform migrations undertaken in 2012 had a negative impact on the established customer base and despite an increase in marketing spend the business reported an operating loss of £0.7m for the first half of 2013. These losses have continued in H2.
Following a detailed strategic review of the business in the last six months, Sportech's management concluded that the operation was not of sufficient scale and that Sportech would need to invest further or acquire additional online gaming assets to derive an acceptable financial return.
Given the investment opportunities in other parts of the business, including those presented by US online regulation and the company’s exclusive horseracing betting platform in Connecticut, Sportech’s board decided to sell the business to a more focused and larger operator which can grow the customer base and better mitigate the impact of UK Point of Consumption tax when implemented in December 2014.
Sportech CEO Ian Penrose said: “Our loss making Vernons casino, poker and bingo business has had a difficult year, and the impending introduction of Point of Consumption tax next year increases the challenges ahead for a sub scale operation in an increasingly competitive marketplace.
“We are delighted to have realised £3m in cash for the sale to NetPlay, who will be able to combine increased scale and market leading interactive gaming television skills to take the business forward.This is another positive step in increasing the focus of Sportech on operations where we hold competitive advantage, particularly those in the US.”
Shares in Sportech plc (Co. Data) (AIM:SPO) will commence trading at 89.50 pence per share in London this morning, while shares in NetPlay TV plc (Co. Data) (AIM:NPT) will commence trading at 19.00 pence per share.