Shock news on Monday was the announcement that Internet gambling
software provider CryptoLogic Inc.is moving its head office from Toronto
to Ireland to gain "strategic flexibility."
CryptoLogic said Monday its software development personnel will remain
in Canada and president and CEO Lewis Rose will step down, citing
family reasons that render him unable to move to Ireland.
Subject to shareholder and regulatory approval, the new headquarters
will be established in January 2007, and CryptoLogic will adopt London's
Alternative Investment Market as its primary stock exchange while
maintaining its listings on Toronto and Nasdaq markets.
"CryptoLogic's business is increasingly centered in Europe,
and establishing our organization in that market is the logical next
step to support our international growth plans," Rose
stated. "For CryptoLogic, this is about being closer to
our customers and to the world's most thriving Internet gaming markets."
Monday's statement also pointed to Ireland's "gaming-friendly
environment that enables the company to provide a wider range of marketing
support and brand management services."
One-time costs of the reorganization and head-office move are estimated
at US$8 million to US$8.5 million, and the company said there will
be added operation and staff costs of US$2.5 million to US$3 million
annually.
However, "...the strategic benefits . . . of locating in
a gaming-friendly environment are expected to yield a significant
return on investment by positioning the company for the future."
CryptoLogic already has its electronic cash processing system in Ireland,
which is "recognized as an attractive Internet gateway to Europe
with state-of-the-art technology infrastructure and skilled personnel."
Rose is to remain as president and CEO into 2007 to assist with an
orderly transition until a new Ireland-based CEO takes over.
With a primary listing on London's AIM, CryptoLogic "joins
a broad peer group that is researched extensively by U.K.-based analysts,"
the company stated. "The U.K. has emerged as the global
center for Internet gaming and is leading the way in implementing
a world-class regulated market for online gaming."
CryptoLogic proposes to exchange its existing common shares for shares
in a new Irish-based company to be called CryptoLogic PLC.
The plan of arrangement is to be conducted on a tax-deferred basis
for shareholders, who will vote at a special meeting planned for late
November or early December.
CryptoLogic reported last month that its April-June earnings were
up 73 percent from a year earlier to US$8.2 million as revenue increased
52 percent to US$30.4 million.