Playtech Acquires Parts of Tribeca

Online gaming software provider Playtech announced today that it has agreed to buy parts of industry rival Tribeca Tables for $75 million.

The sale enables Playtech to absorb business from a number of Net gambling Web sites currently operating on Tribeca's poker software platform, including VC poker, PaddyPower Poker, Blue Square Poker and Expekt.

Playtech said the deal was in line with its strategy of extending its geographical reach following the enactment of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) on Oct. 13, 2006.

"Of the non-U.S. businesses, I don't think we'll have close competition," Playtech CEO Avigur Zmora said. "Most probably we'll be more than twice as big as the next one, with around $400,000 of rake (commission) per day."

Playtech will find "significant" synergies, and its poker revenues will more than double in 2007, he added.

The Tribeca acquisition will cost between $75 million and $139 million, contingent on the level of revenues generated over the coming year.

"On the basis that the company will generate about $16 million over the coming year from the migration date, the consideration to be paid for Tribeca will be $75 million," Playtech said in a prepared statement. "The maximum consideration that the company will be liable to pay is $139 million, which will be paid in the event that the revenue generated from this acquisition exceeds $29 million over the coming year from the migration date."

The fate of Tribeca's U.S.-facing licensees--Golden Palace, Doyle's Room and others--has yet to be determined.

The company announced Friday that in light of UIGEA, it will direct its efforts toward non-U.S.-facing business, saying in a prepared statement that "[The company] would endeavor to assist its U.S.-facing clients in particular with the transition as much as possible."

"Tribeca is [still] going to assist these licensees with a transition," a source close to the deal explained. "Whether that will be to another platform or another software provider, to Tribeca's existing software provider, or if they'll negotiate with Playtech, I don't know."

"I think that in the transition period of six months, Tribeca will be assisting them to move to--more than likely--another platform," the source continued. "So, there're kind of two premises. The European, or non-U.S.-facing brands and licensees will migrate to the Playtech platform, and the U.S.-facing licensees will be given assistance in migrating to wherever they want to go. They've already been in talks with vendors for several weeks."

Over the next 30 days, Playtech will pick and choose the parts of Tribeca's infrastructure it wishes to continue operating.

"One of the companies is in the Philippines, which produces the front end--the look and the feel (of Web sites)," Zmora said.

"That's a very cheap subsidiary, and we need it," he added. "Everybody wants more languages and different feel for different countries. Most probably we'll pick that."

He said they probably won't take on Tribeca's India-based subsidiary, which employs 120 programmers.

Playtech shares opened this morning at 193p, gaining 13 (8.42 percent) to close at 206.