SBC News Lee Richardson - Gaming Economics - The battle for bwin.party; too soon to celebrate?

Lee Richardson – Gaming Economics – The battle for bwin.party; too soon to celebrate?

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Lee Richardson – Gaming Economics

After last month’s proposed £2.3bn (€3.23bn) merger between Ladbrokes and Coral was amicably agreed last week – subject to approval by the UK Competition and Markets Authority – the industry moves onto what could become a more bitter battle.

Ten days ago, 888.com’s £900m (€1.27bn) offer to acquire its larger e-gaming rival Bwin.party Digital Entertainment (Bwin) was accepted, announced and recommended to Bwin shareholders.

This was despite a higher offer for the business from AIM-listed rival GVC, owner of sportingbet.com, which bid in conjunction with Amaya, the world’s biggest listed e-gaming company.

Bwin’s management reportedly declined the higher bid in favour of 888.com due to ‘lower risk’, coupled with a view that the deal’s ‘strategic fit’ was complementary to both sides.

However, at the weekend, the UK Sunday Times suggested that GVC had reached agreement with Cerberus, a New York-based hedge fund, to mount a larger bid, valuing Bwin at up to £1bn (€1.40bn). It is expected that Amaya’s role alongside GVC and Cerberus will be decided early this week.

With sports-betting being the only significant gap in Amaya’s global product portfolio, the appeal of being part of the deal that acquires Bwin’s strength in that sector, within the all-important European market, is obvious.

Whoever eventually wins in the next few days or weeks, is this all good news for Bwin shareholders?

They’ve seen the company struggle with the decline of regulated online poker markets in Europe and to deliver cost savings since its creation via the merger with online poker group PartyGaming in 2011.

After a truly torrid 2014, when it shed 30% of its value, Bwin has partially recovered, up 21% since mid-May, when it put itself up for sale.

Nevertheless, some still might not immediately welcome GVC’s latest apparent manoeuvrings; the 888.com deal was welcomed by US activist investor Jason Ader of Spring Owl, Bwin’s fourth largest shareholder, who rates the agreement as “…offering the least amount of execution and regulatory risk.”

Balancing these competing factors will always be tough for any shareholder, but especially so in this dynamic sector.

As Gaming Economics has reported here before, this is just the latest example of industry consolidation as e-gaming operators try and offset higher taxes and ever-tighter regulation whilst trying to protect and grow share within an ultra-competitive market.

Last Friday, Bwin’s shares closed at 108.60p, giving it a value of £888m. Whilst that number could well be an omen, it seems just as likely that this battle is not yet lost…or won.

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Lee Richardson – CEO – Gaming Economics

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