Proceeds from Aristocrat’s sale of mobile gaming business Plarium are likely to be used for material M&A, share buybacks or other reinvestment and not to pay down existing debt, according to ratings agency Fitch.
After Aristocrat announced this week that it had sold Plarium to Modern Times Group for US$620 million, plus up to US$200 million in contingent considerations pending the achievement of certain financial targets, Fitch said it expects the proceeds to fund Aristocrat’s longer-term growth strategy while effectively reducing the company’s net EBITDA leverage to zero from around 0.8x currently.
“Consequently, Fitch believes material acquisitions could be possible as Aristocrat continues to integrate NeoGames (RMG, iLottery, iGaming and online sports betting provider acquired in 2H24) and Roxor (B2B online supplier acquired in 1H23) under its Interactive segment,” it said.
The sale of Plarium leaves Aristocrat’s Long-Term Issuer Default Ratings (IDR) at “BBB-” with a Positive Outlook, with Fitch adding that the current rating is “accommodative of strategic M&A”.
According to the ratings agency, Pixel United – the social gaming arm under which Plarium was positioned – accounts for around 30% of Aristocrat’s revenue and EBITDA with social casino comprising 55% of Pixel’s operations.
“Fitch believes Aristocrat will see improved revenue growth and margins following the divestment of its midcore segment (32% of Pixel), which focusses on the role-playing games (RPG), strategy and action genre, a division that has witnessed slower growth since 2021 due to market trends,” it said.
Fitch revised in January Aristocrat’s rating outlook from Stable to Positive, citing the gaming giant’s “accelerated and concerted” push into the online real-money gaming space while maintaining its leading position in social casino, casual and RPG gaming genres.
Aristocrat this week reported a 5% increase in revenue in FY24 to US$4.3 billion with EBITDA up 18.5% to US$2.47 billion.
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