Sportingbet, the largest online gaming company in the UK, cancelled takeover negotiations with Empire Online this week. Shares of both companies declined after the news was released. Empire Online took the largest hit, with an almost 20% drop.
Empire Online commented that "talks were only ever at an early stage and were not able to move to completion". CEO Noam Lanir said he was "very impressed'' with Sportingbet management. Sportingbet didn't comment on the specific reasons it cancelled the negotiations, and only issued the following formal statement: “on September 5, the board of Sportingbet confirmed that it was in discussions with Empire which might or might not have led to an offer and that discussions were at a very preliminary stage. Sportingbet can now confirm that, by mutual agreement, it has ceased discussions with Empire in respect of the potential offer.”
Analysts speculated that the reason might have been the perceived lack of control of Empire Online over it's revenue stream, which is largely generated by customers it referred to other gaming companies like 888.com and PartyGaming. Essentially Empire Online is a 16 man marketing machine, without customers of it's own.
PartyGaming owns all information on the players of Empire Poker, the site that generates most of Empire's revenue. A takeover of Empire Online would not be possible without including Partygaming in the negotiations. PartyGaming itself is the most likely candidate to takeover Empire, and when it does so, analysts expect the offer will be considerably less than the initial GBP 790 million Sportingbet was offering.