PartyGaming again dominated the UK mainstream business news this
week with the announcement of a GBP 500 million acquisition plan to
expand its influence into the sportsbook sector.
The announcement followed the launch of the group's new backgammon
site at PartyGammon.com, and its major (believed to be GBP 20 million)
sponsorship of the 2006 WSOP.
According to The Guardian newspaper, Party is on the brink of an expansion
into sports betting via a series of acquisitions to be funded with
the proceeds of a bond issue that could raise as much as GBP 500 million.
It is understood that the first purchase will be of a privately-owned
but as yet unidentified European operator, and will be relatively
small in the context of the fund-raising. Talks are at an advanced
stage and could be unveiled within the next fortnight. More deals
are then planned, according to bond market sources who have been briefed
on PartyGaming's plans.
The size of the fund-raising reflects the scale of a commitment by
new chief executive, Mitch Garber, and the group's controlling shareholders
to "de-risk" by diversifying earnings. PartyGaming's share
price has been consistently battered by attempts by conservative senators
in Washington to ban, or at least restrict, online gambling in the
US, where about 80 percent of the group's customers live.
It is understood that the company has decided not to accept sports
bets from the US in an effort to limit confrontations with the anti-online
gambling lobby. That is the same stance taken by established sports
betting companies such as Ladbrokes, although rival Sportingbet does
do so.
PartyGaming has paid a reported GBP 20 million to gain wall-to-wall
exposure for its brand during televised World Series of Poker events
in Las Vegas next month.
The strategic sense of expansion into sport betting has been demonstrated
during the World Cup. Most online poker operators admit privately
that June has seen a fall in activity on their sites as European online
poker players have tuned in to the football.
In contrast, the World Cup - despite being less profitable than bookmakers
had hoped because of the lack of surprise results - has been a huge
marketing boost for sports betting companies, especially in continental
Europe.
It is thought Garber has ruled out an acquisition of a traditional
"bricks and mortar" casino business, which was regarded
as an alternative for PartyGaming to achieve diversification. Instead,
it will retain a commitment to being a Web-only business.
Sports betting is seen as complementary to its existing operations.
The group has enjoyed success in encouraging poker players to play
blackjack and has just launched a backgammon site. These efforts have
relied upon so-called "shared purse" technology, which allows
players to channel their gambling on all games through one account.
Any new sports betting facility is likely to be put onto the same
platform.
Betting over the internet on sport is a relatively fragmented market
in continental Europe, where PartyGaming's first acquisitions are
likely to be directed.
Industry sources report that a number of privately-owned companies
have been offering themselves for sale in anticipation of a move onto
their territory by poker-based sites.
888 Holdings, operator of the Pacific Poker site, has already revealed
ambitions to acquire a non-US sports book.
Gamebookers, which claims customers in 150 countries, is seen as a
possible target for PartyGaming. The company claims to have some of
the most advanced betting technology and 145 000 customers.