Irish regulator’s issue with the Playtech-AvaTrade acquisition – the real story


A number of rumors and what-might-have-happened type stories and speculation have been circulating on certain blogs the past few days, as to why Ireland’s financial regulator, the Central Bank of Ireland (CBI), has stated its opposition to the acquisition of retail forex broker AvaTrade by online gaming and trading giant-in-making Playtech PLC (LON:PTEC).

Some of the rumors surrounded possible problems the regulator might be having with AvaTrade itself. We understand that there are no basis to those rumors, which also intuitively make no sense – if the CBI had a problem with AvaTrade it would have likely come up earlier, or they would take the problem up with the company, not with the potential acquirer of the company.

And in fact, we learned when the AvaTrade deal was announced that AvaTrade is indeed doing very well, is very profitable, and has a very good record with its regulator. AvaTrade reported 2014 Revenue of $69.9 million, with EBITDA of $24.6 million. And we understand from sources close to the company that during 2015 the company has continued to grow.

We also believe that rumors being bandied about that AvaTrade was denied a license by Cyprus regulator CySEC back in 2008 are untrue – and it also makes no sense that it would affect this deal. AvaTrade (in its old name, AvaFX) was actually successfully granted a CySEC license at around the same time it gained its Irish CBI license, back in 2010. We understand that the company, at the time, decided to go through the licensing process in both Ireland and Cyprus, not being sure which one might be granted first (or at all).

And again, AvaTrade was indeed granted both licenses, at around the same time. The company decided at the time to stay with the Ireland license, and never formally activated its Cyprus CySEC license.

So what is going on now?

Central Bank of Ireland regulatorWell clearly, as with most acquisitions of already-regulated entities, the problem the CBI has here is with Playtech as acquirer, not with AvaTrade. We understand that it is simply a case of the CBI not being comfortable (yet) with a regulated financial entity in its jurisdiction being part of an online gaming related company.

We have no reason to believe that the CBI has any specific issues or claims against Playtech, nor any reason to believe that there is any suspicion of wrongdoing at Playtech of any kind. It is simply a matter of the CBI not as yet being OK with one of its regulated entities operating under the corporate umbrella of Playtech, given Playtech’s other businesses in the gaming platform arena.

We also believe that the CBI’s opposition (which Playtech is challenging) to the AvaTrade acquisition has no bearing whatsoever on Playtech’s other in-process acquisition, that of Plus500 Ltd (LON:PLUS). The UK’s financial regulator, the FCA, still hasn’t given its blessing to the Playtech-Plus500 deal (Plus500 is regulated by both the FCA and by CySEC in Cyprus, CySEC has already approved the deal). But the FCA is very much its ‘own person’, and is not likely to be swayed one way or another by what the Irish regulator does or doesn’t do.

Stay tuned to LeapRate to continue getting the real story as these interesting transactions continue to unfold.

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Irish regulator's issue with the Playtech-AvaTrade acquisition - the real story

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