Amidst a weekend rife with rumors, Ladbrokes, the UK's second-largest
bookmaker, confirmed late Sunday that it is in talks to buy the online
poker and casino group 888 Holdings as pressure mounts on the internet
gaming industry to merge after a US clampdown on financial transactions.
Led by CEO Christopher Bell, executives of the gambling group were
in Israel over the weekend to discuss a takeover deal with former
CEO John Anderson and Avi and Aharon Shaked, the two brothers who
founded and who remain controlling shareholders in the London-listed
888.
The discussions are believed to have been brokered by 888's outgoing
chief executive, who is also a former Ladbrokes director.
888, which has a market value of GBP375 million at current prices,
told shareholders last week it was in "preliminary discussions"
which could lead to a takeover bid. The rival online operator PartyGaming
is believed to be among 888's suitors, but some sources say that its
interest has waned recently.
The Las Vegas casino groups MGM and Harrah's Entertainment are also
thought to be taking an interest in the latest round of consolidation,
precipitated by anti-gambling legislation in the US, the largest market
for online operators.
Any 888 deal must win the backing of the Shaked brothers, who together
control 51 percent of the company after floating it on the London
stock exchange last year and each selling shares worth GBP52 million.
The views of co-founding family, the Ben Yitzhaks, may also prove
critical. They retain a 17.5 percent stake as well as a seat on the
board.
Ladbrokes issued a statement late Sunday confirming it was "in
the early stages of reviewing a possible transaction involving 888.
No decision has been made." Reports over the weekend suggested
888 could fetch as much as GBP 470 million.
Chris Bell, chief executive of Ladbrokes, is understood to have met
Anderson and the Shaked brothers in Israel. Previously Bell made it
clear he was committed to expanding in Europe as well as building
on Ladbrokes fast-growing internet operations, which last year accounted
for 15 percent of operating profit.
Five years ago Ladbrokes was among UK bookmakers to negotiate major
tax concessions in exchange for a commitment to bring offshore telephone
and internet sports betting back to the UK. Ladbrokes gaming operations,
however, remained in Gibraltar and have been operating from the same
office building as both 888 and PartyGaming.
The UK Treasury is believed to have been looking at various tax treatments
for online gaming groups in an effort to strike a similar deal that
would lure major players in this relatively new industry onshore.
Meanwhile, PartyGaming is understood to be looking at alternatives
to a merger with 888. It is believed to be exploring talks with the
Austrian sports betting-focused group Bwin, formerly known as Bet
and Win. Mitch Garber, the chief executive, wants to develop the group's
sports betting offering and in August PartyGaming acquired Bulgarian
sportsbook Gamebookers, soon to be re-branded Party Bets.
PartyGaming is expected to launch its PartyBets.com web platform to
sit alongside the already established PartyPoker, PartyGammon and
other branded sites.