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AIM-listed Optimal Payment Solutions has announced it is set to acquire Skrill (formerly Moneybookers) for a cool £800m, which translates into $1 billion US and some change.
Skrill is the leading alternative payment solutions company in the online gambling space. Both companies produced earnings of $90m last year. Optimal was slated to have an enterprise value of well over £1bn. They are also seeking a move to the LSE's FTSE-250 Midcap Index.
The Financial Times of London outlined the pending deal Monday morning:
To help fund the deal, Optimal is mounting a rights issue to raise £451m. The discount to the price of its shares before they were suspended is a hefty 34 per cent to the “theoretical ex-rights price”. This is City geek speak for the ownership of company cash flows that shareholders give up if they do not stump up for rights.
Investors including private equity group CVC are selling Skrill for a value that is 13.5 times historic earnings. Cost savings should reduce the ratio to below the level of 11.3 times recently commanded by Optimal shares, which have traded at a discount to many rivals.
"The U.S. (gaming) market, in particular, is just reopening and re-evolving," Chief Executive Joel Leonoff told Reuters.
"Ultimately we're looking at states like Pennsylvania and California to come online and this (deal) certainly establishes us as a very relevant supplier to the industry."
Strong growth at Neteller, one of online gambling’s first and most successful alternative processing platofrms, has boosted Optimal's results over the past year. North America accounted for 27 percent of revenue in the year ended Dec. 31.
"(The deal) brings a major competitor on board, sharply reduces the exposure to Asia and brings credible venture capitalist investors onto the share register," Numis analyst Ivor Jones wrote in a note.
- Aaron Goldstein, Gambling911.com
