Gaming software specialist Playtech (LSE: PTEC) is acquiring Virtue Fusion, a developer and licensor of online bingo products, for an initial consideration of £29 million in cash, and potentially £36 million depending on the EBIT performance of Virtue Fusion in 2010.
The acquisition appears to have clear rationale for Playtech, which said the transaction would transform it into a leader in bingo market, complementing its position in poker and casino. The acquisition is also expected to be earnings accretive in 2010, and generate “additional cross-selling opportunities”.
In 2009, Virtue Fusion generated revenues of £12.3 million and adjusted EBITDA of £3.8 million, compared to revenues of £8.1 million and adjusted EBITDA of £2.3 million in 2008. Playtech is clearly paying a premium to gain a strong foothold in the Bingo sector, which according to the company, was one of the fastest growing online gaming segments in 2009.
Virtue Fusion has (during peak traffic) more than 6,000 concurrent players in the United Kingdom, and also licences its products to more than 20 other groups, including Paddy Power, Vigrin and William Hill.
“For Playtech, the acquisition significantly enhances its own bingo offering, brings new licensees and enhances its relationships with a number of existing licensees. It also positions Playtech as the leading supplier in all of the key product segments in the online gaming industry, with very substantial liquidity in each of its player networks,” Playtech stated this morning.
“As with poker, network player liquidity is an important element for bingo operators. By linking the operator's bingo rooms across the network, Virtue Fusion can facilitate more frequent games being offered and higher prize values and jackpots for the same individual stake. Both Playtech and Virtue Fusion's existing licensees will therefore enjoy the benefits of increased liquidity when their networks are combined.”