oday’s announcement covers two separate agreements;
Playtech will provide marketing and advisory services, including sophisticated business intelligence and CRM systems to grow the lifetime values of Ladbrokes Digital customers.
To benefit fully from Playtech’s proven track record in this area, Ladbrokes is creating a new, wholly owned, ecommerce and digital marketing services operation, to be based in Israel and integrated with the company’s existing Digital teams in London and Gibraltar. The new operation will be managed by a highly experienced marketing team, with a proven track record of driving digital revenues, particularly utilising Playtech software.
Closely aligned to this is an expansion of Ladbrokes’ existing product agreement involving access to Playtech’s full product suite and technology including the IMS back office system. In the first instance this will see the launch of a new Vegas tab on Ladbrokes.com, offering a suite of Playtech casino and games products in addition to a range of third party products from other suppliers. In due course Ladbrokes will also migrate to Playtech’s download casino and poker products.
Accelerates ability to drive online and mobile revenues.
Acquisition of experienced and skilled digital marketing team with track record of success<
Use of Playtech products, CRM tools and multiple brand approach designed to drive customer lifetime values
Consideration for marketing services entirely contingent upon growth in Ladbrokes’ Digital EBITDA.
Accelerates anticipated benefits from investments made in Digital infrastructure, product, trading and website.
Enhances opportunity to provide customers with most compelling range of cross channel gaming product.
Period of integration expected before benefits of agreement are realised
Commenting on the agreement Ladbrokes CEO Richard Glynn said: “Ladbrokes has made significant progress over the past two years by investing in our core technology, revitalising our brand and making our customer offer more competitive. The next phase of this reinvigoration will see us work closely with Playtech to increase customer lifetime values through enhanced CRM, an area in which Playtech has a proven track record. The formation of a new, Ladbrokes owned, ecommerce and digital marketing services function, in addition to an expansion of our existing product relationship is a material development. This relationship will accelerate our progress in a sustainable way over the next five years and beyond.”
Playtech CEO Mor Weizer commented: “This is an exciting opportunity to play a key role in delivering material growth to Ladbrokes Digital business in the coming years. The combination of Ladbrokes’ brand strength, its newly invested core technology and Playtech’s proven track record in growing digital revenues through advanced ecommerce and digital marketing has significant potential. The structure of the agreement reflects our confidence in accelerating Ladbrokes' Digital revenue growth.”
Over the past two years, the company has made material progress in redeveloping its Digital offer, investing to re-architect core technology, improve trading capabilities, expand the product range and enhance its online and mobile services. The creation of Ladbrokes Israel represents another key step in this journey, by upgrading the company’s Digital marketing capabilities, a fundamental driver of growth in customer lifetime values.
These agreements combine the strength of the Ladbrokes’ brand, expertise in sports betting and newly invested technology with a world leading eCommerce and digital marketing services business with a proven track record of growing revenues in the online gaming sector. The expanded product arrangements accelerate the company’s ability to launch cross channel content and enhance our flexibility to continue adding the best new slots games from an increasingly broad range of suppliers.
As part of the expanded product arrangements, Ladbrokes will launch a new and dedicated Vegas gaming tab (Vegas) across online, mobile and tablet during Q3 2013. Customers will have access to a suite of circa 200 additional games giving Ladbrokes the opportunity to provide its customers with exclusive cross-channel content as Playtech’s Videobet technology provides the software platform for Ladbrokes’ gaming machines in the Retail estate. Vegas is based on the GTS platform which also aggregates gaming content from third party developers, thereby increasing the company’s ability to continue strengthening its gaming offer by using a wide range of suppliers. In due course Ladbrokes will also migrate to Playtech’s download casino and Poker products.
Digital marketing and CRM
Gaming product will be supported by Playtech’s IMS software, widely recognised as a leading cross channel, cross product back office solution. IMS will enhance the company’s ability to execute an effective retention strategy, tailor promotions, and implement bonuses in a seamless fashion across all products, thereby growing player value. The creation of a single gaming and sportsbetting wallet is expected to be fully implemented in H1 2014 and will further improve the company’s ability to cross sell customers between products.
Ladbrokes Israel will be a wholly owned subsidiary of Ladbrokes International. From 1 May 2013, forty people will be employed by Ladbrokes Israel with the senior team acquired from The Nation Traffic, a highly experienced online and offline CRM company with a proven track record of working with Playtech’s products and back office systems. Ladbrokes Israel will report into the existing Ladbrokes Digital operations.
A key driver in creating value will be the experience that the management team of Ladbrokes Israel bring in managing the acquisition, customer retention and enhancement of customer lifetime values through every stage of the digital lifecycle. Ladbrokes will integrate this marketing team to enable the use of sophisticated business intelligence techniques within the existing Ladbrokes Digital business. The team brings extensive insight and experience in creating and managing multiple brands, in multiple languages, increasing the opportunity to grow Digital revenues in existing and new territories.
Integration and timing
There will be a period of integration before the full benefit of both the marketing and advisory services and expanded product deals can be realised, some disruption is therefore inevitable, given the need to address the alignment of people and product migration. The Board is confident that these arrangements will deliver a significant acceleration in the growth of Digital revenues over the five years to 2017 and beyond.
The consideration for the marketing services agreement is on a success fee only basis and is structured to incentivise acceleration in the growth of Ladbrokes Digital business. Payments will be based upon the uplift in Digital EBITDA between the financial years ending 31 December 2012 and 31 December 2017.
Interim payments will be made upon the achievement of agreed increases in EBITDA, set at us$ 52.2 million, us$ 104.4 million and us$ 149.2 million. Payments will be calculated at 27.5% of incremental EBITDA, multiplied by the prevailing Ladbrokes Group multiple in the year of calculation, with at least 25% to be settled in Ladbrokes shares (Playtech can elect for up to 100% of consideration to be settled in shares).
As target levels are met, 75% of any payment will be made, with the remaining 25% to be paid only at the earlier of the achievement of the next incremental milestone or the end of the deal term. At all times 50% of any shares issued will be deferred until the earlier of the achievement of the next incremental milestone or the end of the deal term.
In addition, should Digital EBITDA in the financial year ending December 2017 be more than us$ 149.2 million higher than for financial year December 2012, Playtech will receive a one off bonus equal to 75% of the excess over and above the us$ 149.2 million target. This is subject to a cap of us$ 74.6 million and payable in the financial year ending December 2019.
Aggregate success fees, payable as part of the marketing services agreement, have been capped at a level which does not require shareholder approval. The combination of the software and marketing services agreements is expected to be accretive to shareholder value over the next five years and beyond.
The key elements of agreements announced today are:
The provision of digital marketing and advisory services from PT Turnkey Services (a wholly owned subsidiary of Playtech) for a term of 5 years, starting 1 May 2013, the consideration for which is payable on incremental increase in annual EBITDA of the Ladbrokes Digital business which will include a non-exclusive licence of software and intellectual property, which will enhance the ability of Ladbrokes to maximise the benefits of Playtech’s IMS back office systems.
The acquisition of The Nation Traffic Services which will be renamed Ladbrokes Israel on completion, is expected to occur on 1st May 2013. The consideration for the acquisition of Ladbrokes Israel will be us$ 1.2 million. The management of Ladbrokes Israel will be acquired from The Nation Traffic, an Israeli company specialising in online and offline CRM for online gaming operators and expert in operating on Playtech systems.
The expansion, on normal commercial terms, of existing product supply arrangements with Playtech Software Limited to include Casino, Poker and other gaming products.