Playtech to pay founder, Teddy Sagi, millions in software deal

Teddy Sagi, founder of Playtech, the Aim quoted online gaming company, will receive nearly 5.6 million pounds per year through a series of deals. Playtech, which is owned by the Israeli billionaire, has agreed to pay 6 million euros per year for the licences to use software for traditional gambling activities such as online poker, online casinos, online bingo, and the latest gaming craze, online social gaming. Apart from making money from licencing software, the social gaming business will net Playtech 20 percent in revenues generated by licensees. These deals have raised eyebrows among some analysts in advance of an expected move to the London stock exchange this summer.

It appears that Playtech has changed its plans from earlier in the year when it had announced that it was to pay Mr. Sagi 95 million euros to buy his software companies, and another 10.5 million pounds for his London properties. Playtech has now agreed to pay companies owned by Mr. Sagi 750 000 pounds to rent office space in London.

A Peel Hunt analyst, Nick Batram, described these current occurrences as Playtech “tidying up” before it gets listed on the London Stock Exchange. Another analyst has speculated that the 6 million euro fee and revenue sharing component is a good draw for would-be investors. However, if you are paying out 20 percent of your revenues in social gaming to Mr. Sagi, it will make it hard to make a profit.

Commenting on the deals, Playtech chief executive, Mor Weizer, described the licensing deal as “a cost effective entry into social gaming”.

These deals are the latest in a long series of business transactions with Mr. Sagi who founded Playtech in 1999, and  owns 48.3 percent.

Playtech shares closed down 3 percent at 345p.