888 takes lead in the battle for £898.3m bwin.party

888 Holdings has trumped rival bidder GVC Holdings by agreeing a deal to buy fellow operator bwin.party for £898.3m. The deal was announced to the stock market this morning. It’s a huge achievement for the casino operator, given that before the announcement 888 had a market capitalisation of approximately £570.8m.

888 believes that the deal will provide significantly enhanced scale, an enhanced product offering and significant cost and revenue synergies. It is expected that such cost synergies will amount to not less than US$70 million per annum (before tax) by the end of the 2018 financial year. The cash needed for the deal will be financed through a new US$600 million term loan credit facility.

Brian Mattingley, Executive Chairman of 888, said: “This is a transformational opportunity for 888 in the consolidating online gaming industry, which is expected to grow significantly over the coming years.  The Enlarged Group will benefit from significantly enhanced scale, an improved product offering as well as significant cost and revenue synergies. It delivers a substantial premium to bwin.party Shareholders whilst also giving them the opportunity to participate in this value creation opportunity.  888’s management have a well-established track record of delivering outperformance since 2011 and we look forward to working with our new colleagues to create a global leader.”

Philip Yea, Chairman of bwin.party, said: “A year ago we set out to explore industry consolidation opportunities whilst working to improve our core business. We have made substantial progress on both counts and our announcement today marks the first step in a new phase in our short history. Bringing our two groups together will generate substantial financial synergies for the benefit of both sets of shareholders and create a strong player with the breadth of product, brands and geographic coverage to grow faster than either business would be able to achieve stand-alone. Drawing upon a wealth of experience accumulated over the past few years, our management team looks forward to working with new colleagues to realise the considerable potential that this business combination presents.”

The deal will see bwin independent non-executive director Liz Catchpole and CFO Martin Weigold join the 888 Board as an independent non-executive director and a non-executive director, respectively, while CEO Norbert Teufelberger is to stay on asa consultant with regard to the Enlarged Group’s sports-betting offering.

For each bwin.party share held, the owner will be entitled to 39.45 pence in cash and 0.404 New 888 Shares. The deal gives an approximate value of 104.09 pence per bwin.party share; a premium of approximately 16.4% to the closing price before the announcement of talks. Following completion of the Offer, bwin.party Shareholders will own approximately 48.9 per cent of the issued ordinary share capital of the Enlarged Group.

The Offer will be put to bwin.party Shareholders at the Court Meeting and at the General Meeting. In order to become effective, the Scheme must be approved by a majority in number of the Scheme Shareholders voting at the Court Meeting, either in person or by proxy, representing at least three-quarters in value of the Scheme Shares voted at the Court Meeting. In addition, special resolutions implementing the Scheme and approving the related Capital Reduction must be passed by bwin.party Shareholders representing at least three-quarters of votes cast at the General Meeting.

“The deal is strategically compelling for 888 and they look to have secured Bwin.party for a reasonable price and efficient structure,” Nick Batram, an analyst at Peel Hunt in London, said in a note. “There would appear to be room for GVC to come back, but 888 now looks firm favorite.”