Playtech inaugurates German joint venture

Merkur Interactive is the online division of gaming machine manufacturer Gauselmann Group and the deal comes in addition to a related software licensing arrangement that will see London-listed Playtech provide online gaming technology and its player management system.

“We are delighted to be able to announce this significant joint venture with the leading German gaming brand,” said Mor Weizer, CEO for Playtech. “Gauselmann and its Merkur brand are universally renowned throughout Germany and will provide a fantastic springboard for the business once regulations permit online activity.

“While the regulatory and fiscal environment remains uncertain, it is clear that a partnership between Playtech and Gauselmann can deliver a combination of market-leading capabilities, which have the potential to achieve a significant market share however the market regulation develops.

“A joint venture structure was viewed by both parties as being the best way to achieve their strategic goals and has the potential to deliver significant returns to both shareholders. This transaction also clearly delivers on our indications of the likely form of our joint ventures and, with a partner of the quality of Gauselmann, it can be seen to be validation of the PTTS acquisition in March of 2011 that made this opportunity achievable.”

Playtech stated that the proposed business activities of the German joint venture will encompass regulated online sportsbetting, gaming and gambling products and will apply for ‘specific regulatory licenses dependent upon each territory and gaming activity’.

Gauselmann will hold a 50.01 percent controlling interest in the new enterprise with the partners agreeing to equal board representation. Playtech declared that the joint venture is expected to turn into a ‘long-term relationship’ while no formal call option exit structures have been envisaged before 2019 other than under the normal rights of pre-emption.

“Playtech will inject marketing know-how, affiliate marketing contacts and certain German-focused marketing managers from its PTTS services division,” read a statement from Playtech.

“Gauselmann will provide exclusive online rights to its Merkur and Gauselmann gaming brands along with related infrastructure and business relationships. The capital requirements and financial return profile of the business will be highly dependent on the regulatory and fiscal regime developed in Germany. Substantial working capital requirements for the operations are expected as soon as the market regulates and will from then on be shared equally between the two partners.”

Playtech announced that the ‘substantial working capital’ provided by the parent companies is to be used for player acquisition and retention activities over the first year while the new venture is expected to become self-financing within 18 months and ‘deliver significant returns to each partner principally by way of cash dividends’.

“As a distribution channel, the Internet undeniably provides a wide range of opportunities for us,” said Dirk Quermann, CEO for Merkur Interactive. “This equally applies to gaming and cash winning games. Due to the prevailing legal framework, it has hitherto been impossible in Germany to offer domestically such games online.

“If, however, the domestic legislation on gambling is amended and allows for regulatory change to such conditions and enables commercially attractive operations, we will, of course, commit ourselves accordingly, he added.

“In Playtech we found the right partner to work with to provide a successful offer for the German online market even in the face of tough competition from international gaming groups. The joint venture will be able to particularly benefit from the high awareness level of our brand where the logo of the smiling Merkur sun is the most popular gaming symbol in Germany, our first-class games as well as Playtech's profound experience and comprehensive technical and especially marketing know-how in the field of Internet gaming,” Quermann concluded.