PartyGaming pays $105m to avoid US prosecution, by James Thompson - The Independent - 8th April 2009

Online poker firm PartyGaming yesterday vowed to go on the acquisition trail after it finally settled a legal dispute with US authorities that could eventually pave the way for it to return to the world's most lucrative market.

The settlement, which follows a two-year legal battle, means PartyGaming will not be prosecuted for providing "real money" internet gambling services for nine years prior to US legislation banning the activity in October 2006. However, PartyGaming has agreed to pay a penalty of $105m (£72m) in instalments over three and a half years. The verdict sent shares in PartyGaming soaring by 31p, or 14.16 per cent, to 250p yesterday. It also lifted rival online gaming companies, with 888 Holdings up by 7.8 per cent and Sportingbet higher by 13.25 per cent.

Jim Ryan, the chief executive of PartyGaming, said the settlement removed the uncertainty over its strategy and will help it secure financing to fund acquisitions. "We can now look at merger and acquisition opportunities and have access to capital markets," he said, though he declined to name takeover targets.

Mr Ryan believes PartyGaming will be well placed if, and when, the US authorities overturn legislation that prohibits online gambling.

PartyGaming will pay the first instalment of the $105m forfeiture on 10 April and the final payment is due on 30 September 2012. The company exited the US market after the Unlawful Internet Gambling Enforcement Act came into force on 13 October 2006, effectively banning its business.

Nick Batram, the analyst at KBC Peel Hunt, said the size and payment structure of the settlement was "better than we expected". He added: "The settlement with the DoJ [Department of Justice] should mark a point of inflection for the group which can now look forward without being anchored by the past."

The settlement overshadowed PartyGaming's subdued first-quarter trading update. For the three months to 31 March 2009, group revenue fell by 22 per cent to $100.1m. Its poker revenues tumbled to $53.6m from $80.7m, as it faced new US entrants in Europe and foreign currency movements. (Credit: The Independent)

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