March 11 (Bloomberg) -- Ladbrokes Plc rose to its highest in five years after the U.K. gambling operator said it expanded a partnership for online and mobile software with Playtech Ltd., which ended a joint venture with William Hill Plc this month.
Ladbrokes gained as much as 8.3 percent, its biggest intraday advance since April 2009, to 243.9 pence, the highest price in London trading since July 2008. Playtech rose as much as 3.9 percent, almost erasing the decline since it said March 1 that William Hill exercised an option to take full control of gambling venture William Hill Online.
“Following the success of William Hill Online and given the problems that Ladbrokes have encountered in its own online business, this will be seen as a transaction which could significantly improve the Ladbrokes online prospects,” Jeffrey Harwood, an analyst at Oriel with a hold rating on Ladbrokes, said in a note today.
Ladbrokes and rivals including William Hill are increasing their online offerings as more customers use the internet and mobile phones to place bets. Playtech will provide expertise as Ladbrokes creates a new e-commerce and digital marketing services operation, Ladbrokes said today in a statement. It will also provide more software, including games for a new “Vegas” tab on Ladbrokes.com.
“The deal augments perfectly the organic development in Ladbrokes,” Chief Executive Officer Richard Glynn said in a phone interview. “We had to build the foundations. This deal will accelerate the pace of growth.”
Contingent on Success
Payments to Playtech for marketing services will be based on a “success fee only basis” and will be made incrementally based on increases in earnings before interest, taxes, depreciation and amortization at the digital unit, Harrow, England-based Ladbrokes said. The agreement runs through 2017.
William Hill is acquiring Playtech’s 29 percent stake in William Hill Online for 424 million pounds ($632 million) in order to take full control of its digital unit. Playtech Chief Executive Officer Mor Weizer has said he was “delighted” with the valuation.
Ladbrokes was up 6.7 percent at 9:55 a.m. as more than 2.7 million shares traded, exceeding the daily average over the past three months. Playtech was 3.3 percent higher at 569.5 pence. William Hill rose 0.5 percent to 426.5 pence.
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