Sportech is giving up nearly a third of its shareholding to pull off a three-way deal that sees the football pools and gaming business purchase one of the main providers of pool betting on horse racing in the US.
The Liverpool-based company is paying $75m to buy Scientific Games Racing, a division of Scientific Games, the gaming services supplier based in New York, in a cash and shares deal.
SGR provides pool betting systems to half the racetracks in North America, as well as being the equivalent of the UK’s Tote in Connecticut and Holland.
The funding comes from a $32m cash payment and the placing of $33m of new shares that will be purchased by Scientific Games, giving the US company a holding of just under 20 per cent in the expanded Sportech.
The cash payment is being made through a £29.2m fundraising, which will also go towards paying advisory fees and paying off Sportech’s debt.
Playtech, the online gaming software provider which last week secured a joint venture with Scientific Games, is contributing £10m, giving it a stake of just under 10 per cent, the remainder going to institutional investors.
A further $10m payment is being deferred until September 2013. Sportech will pay Scientific Games another $8m depending on the achievement of performance targets.
Sportech said the deal opened up possibilities for it to become a large force in pari-mutuel betting across the globe, taking advantage of the technologies and networks of its new partners.
Ian Penrose, chief executive, said: “The transaction leaves us as a leading business in the global pari-mutuel marketplace, with representation in Europe and in North and South America.”
The deal is also likely to make the enlarged Sportech even keener to acquire the UK government’s Tote business, which is back on the market. But Mr Penrose said such a move had not been discussed between the three partners.
But the deal also puts at risk the joint venture Sportech signed with 888 Holdings, the online gambling operator, in June 2008 to supply gaming operations to Sportech and help it market products.
Talks are taking place between Sportech and 888, but Sportech said there was “a risk that a positive outcome may not be reached”, and that the impact on Sportech could be about £2m.
The Sportech/888 deal lasts until the beginning of 2011. “We expected the relationship to go strongly in terms of profit generation, but it hasn’t reached that level,” Mr Penrose said.
Mor Weizer, Playtech’s chief executive, said: “We share many of Sportech’s goals in growing our business in regulated markets.”
Sportech shares fell 2½p to 54p on Wednesday. Playtech shares fell marginally to 514p.