Betcorp announces that the Company has entered into an agreement,
conditional only on the approval of Shareholders, to sell the Group’s
gaming operations and operating infrastructure in Antigua and Toronto
in their entirety (“the Gaming Operations”) to Bodog Entertainment
Group SA.
The consideration payable to Betcorp in respect of the Disposal comprises
a maximum cash consideration of US$9 million payable in five installments.
US$3 million is payable on completion and the balance of US$6 million
in four equal quarterly installments during the 12 months following
completion. In addition, the purchaser will be assuming the net current
liabilities of the gaming operations of US$2 million, implying an
enterprise value of US$11 million.
The cash consideration will be reduced by the extent to which the
net current liabilities of the gaming operations at completion exceed
$2 million. Currently, these are expected to be approximately US$3
million. The final amount will be dependent, inter alia, on the trading
performance of the gaming operations during the period through to
the completion date.
Had the Group’s gaming operations been closed down, the Board
estimates that the cost of severance and closure would have been approximately
US$6 million.
The statement goes on to describe the reasons for the sale, recapping
on the recent events leading to the Unlawful Internet Gambling Enforcement
Act and emphasizing that the Board took advice from legal counsel,
bankers and other advisors before agreeing to the sale.
"The two key issues which led to this conclusion are the
possibility of the extra-jurisdictional application of United States
legislation and the restrictions on financial transaction processing
which are following from the Act. As a result, the Group suspended
the accounts of United States residents on 13 October 2006."
Betcorp says that although it has been diversifying into other markets,
85 percent of its business came from the US-facing operations. It
also expressed doubts about its ability to build a non-US gambling
business going forward, saying:
"The Board has considered whether its non-US business could
be profitable on the basis of a substantially reduced cost base, but
has determined that this would not be possible without a major increase
in trading volume.
"In the current environment, such expansion would require substantial
investment in marketing and brand development, or the acquisition
of existing non-US facing operators.
"The Group does not have access to the funds required to adopt
either of these strategies and accordingly, the Board has concluded
that it is in the best interests of shareholders to dispose of the
Group’s entire gaming operations and infrastructure.
"The Board has considered approaches from a number of interested
parties and has concluded that the terms agreed with the purchaser
represent the best available to the Group. In addition to the cash
consideration receivable of up to US$9 million, the purchaser is also
assuming the net current liabilities of the gaming operations and
has undertaken to honor the existing employment rights of employees
and the Group’s obligations to its customers."
The Betcorp directors go on to confirm earlier information that Bodog
intends to invest in developing its own brand into the European and
Asian markets utilizing the multi-currency shared purse operating
platform developed by the Group.
"The purchaser has also undertaken not to use any URL,
trade mark, brand name or other intellectual property acquired from
the Group to provide services to United States residents, following
its purchase of the gaming operations."
Dealing with the proceeds and post disposal strategy, Betcorp announces
it will have exited its gaming interests in their entirety, immediately
following the sale. As a result, the net assets of Betcorp will comprise
cash, the deferred consideration payable by the purchaser and creditors.
"The Board believes that shareholders’ best interests
will be served by the return of funds to them and the Board’s
plans for this will be announced as soon as possible. Shares traded
on AIM and currently listed on ASX will rank pari passu in any future
dividend or distribution, both before and after the de-listing of
the Company’s shares from ASX."
There will be a extraordinary general meeting within the next month
in order to obtain the approval of shareholders, who will shortly
receive full information.
Commenting on the acquisition, Colin Walker, Chief Executive Officer
of Betcorp said: “I am pleased that we have secured the
sale of our operating subsidiaries to the Bodog Entertainment Group,
one of the leading companies in the digital entertainment sector.
In very difficult circumstances we have achieved a satisfactory outcome
for shareholders and have been able to safeguard the interests of
our customers and employees.”