PartyGaming in talks with Bwin - 13th December 2009

PartyGaming is in talks with Bwin, the Austrian-based rival online gambling company, about a potential merger, a move that analysts have long been predicting as a possibility in an industry looking to consolidate.

The close-knit industry has seen a number of companies explore merger options with each other this year, as they wait for new markets to open.

Insiders at PartyGaming said current talks with Bwin went beyond the usual exploratory nature, but emphasised there was no imminent prospect of a deal. Both companies are licensed in Gibraltar.

However, the insiders said PartyGaming was keen that any deal with Bwin would be based on a merger of equals. The market capitalisation of both companies are similar – PartyGaming is worth £1.1bn, while Bwin is valued at around €1.3bn (£1.17bn). Neither PartyGaming nor Bwin would comment on the matter.

The desire for deal-making is likely to strengthen as countries that had turned their faces against regulated online gambling markets (France, Australia, India and United States) begin to step up preparations for liberalisation, albeit limited in some cases.

France is preparing for a partially-liberated market in 2010, Italy is widening its market to include bingo, casino and other games and other European states, with an eye on the potential tax revenues from the industry, are inching towards regulation.

PartyGaming has been preparing the ground for a significant deal, having sealed a non-prosecution agreement with the US department of justice in April over its trading in the US, in return for a forfeiture of $105m.

Jim Ryan, PartyGaming’s chief executive, has repeatedly said that the settlement was a necessary step prior to any merger activity on its part.

Bwin, listed on the Vienna Stock Exchange, is also keen on pushing ahead with merger activity at a time when the company is establishing itself as one of Europe's strongest online gambling companies.

Norbert Teufelberger, co-chief executive of Bwin, last month told the Financial Times that demand from big investment houses was significant and that Bwin would emerge from consolidation as “one of the bigger guys in this industry”.

Bwin, which has 20m registered users, has seen shares rise up 177 per cent in the last 12 months. It is expected to achieve gross gaming revenues of €450m, and adjusted earnings before interest, tax, depreciation and amortisation of €110m.

Bwin strengthened its position in online poker this past September by purchasing Italian operator Gioco Digitale. It has established a strong sports betting product, and is the shirt sponsor of Real Madrid and AC Milan.

Other companies with an eye on events at PartyGaming and Bwin include 888 Holdings, Sportingbet and Unibet.

More details on the PartyGaming - Bwin talks as details come to hand. (Credit: Wires, Google News, Financial Times, Bloomberg, AP).

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