Party Gaming ended 2006 with a bang this week, splashing out on the
acquisition of both Empire Online group and online casino operator
Intercontinental Online Gaming to the tune of GBP 33.7 million (US$
66.3 million) in shares. Party will fund the acquisitions by issuing
115.2 million new shares, according to a statement from the company.
The announcement that the deal was done drew a line under the extensive
reportage and rumor that has been a feature of industry happenings
this week as analysts predicted more consolidation moves in the industry,
and speculated on what Empire will do as an investment group following
its departure from the industry.
The deal will see Party Gaming take control of online gambling sites
such as Noble Poker and Club Dice casino from Empire's stable, and
Magic Box Casino from IOC.
In a statement, PartyGaming said it expected Empire's Web sites to
generate core profit of more than $6 million in 2007, while Intercontinental's
sites, including MagicBoxCasino.com, will generate more than $2.5
million.
"These acquisitions represent excellent value for our shareholders
and are consistent with our strategy," said Party's chief
executive Mitch Garber.
"The addition of a number of well-known secondary brands
will provide opportunities for cross-promotion, increasing customer
choice and satisfaction and maximizing the long term value of current
and future players."
Roughly $10 million of the $48 million in stock that Empire Online
is receiving will be transferred to an account for employees of Empire
Online who will join Party Gaming.
"They bring incremental EBITDA and strong management with
excellent marketing skills that will help us to accelerate our promotional
plans for each of our individual products, particularly in casino
which will continue to be spearheaded by Party Casino,"
said Garber.
Following completion of the sale, Party Gaming will approach the gambling
software provider for Empire and IOC, Playtech to negotiate a deal,
the spokesman added.
Empire spokesmen said the recent crackdown on internet gaming financial
transactions in the US, where most of its business was based, had
made it impossible for it to stay independent. The group will retain
about $40 million, which will be combined with its existing cash pile
of $250 million to establish a fund for investing in equities, bonds,
derivatives and real estate.
Up to 50 percent of its funds will be put into bonds, up to 30 percent
in stocks, up to 30 percent in real estate, up to 20 percent in absolute
return funds and up to 10 percent will be earmarked to derivatives,
Empire said.
PartyGaming also had good news for its remaining staff, saying that
the group would compensate employees for damage to its incentive scheme
when the United States effectively banned online gaming in November,
wiping about three-quarters off the value of its shares.
Chief Executive Mitch Garber will receive shares and a minimum bonus
of GBP 2 million for staying at the helm through 2007.
PartyGaming's operations have improved since the Unlawful Internet
Gambling Enforcement Act came into force in the USA (see previous
InfoPowa reports). Gross daily poker revenue averaged $721 000 a day
in the four weeks to Dec. 11, having hit a low of $637 000 after the
law was passed.
Despite the loss of substantial American business occasioned by its
withdrawal from that market, Party managed to sign up an average of
over 1 400 new customers a day since the ban went into effect. Garber
has revealed that the group will now be focused on Europe, Middle
East and Africa, which represent 80 percent of new player sign-ups
and 67 percent of gross daily revenue. He also intimated last month
that he had a competitive acquisition strategy in mind.