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Bwin.party Jilts Amaya, Opts for 888 Holdings Takeover Bid

In a startling announcement, bwin.party today advised its shareholders that it was recommending a takeover bid from 888 Holdings, while turning down a higher-valued but somewhat riskier competing bid from market rival GVC Holdings that included the backing of Amaya Gaming, the owner of online-poker market leader PokerStars.

bwin-party-logoThe bids from both 888 and Amaya were first acknowledged publicly by bwin.party’s board of directors in mid-May, and in opting for the 888 offer — and pending the offer’s acceptance in the required shareholder vote — bwin.party shareholders will receive a combination of cash and new 888 stock in exchange for their bwin.party holdings.

According to a detailed financial statement released today. bwin.party’s shareholders will receive 39.45 pence (£0.3945, or about USD 61 cents) plus 0.404 share of newly-issued 888 Holdings stock in exchange for each single share of bwin.party stock already owned.  Based on yesterday’s closing price for 888 stock of £1.60, the deal means:

  • A value of approximately 104.09 pence (£1.04) per bwin.party share to be exchanged;
  • A premium of approximately 16.4% over the value of bwin.party shares back on May 14th, just before the 888 bid was publicly acknowledged. Since then, bwin.party’s share price has already risen in expectation of the company’s takeover, whether by 888 or GVC/Amaya, meaning that most of the expected premium is already reflected in bwin.party’s current share price;
  • The deal represents a slightly larger premium of approximately 24.1%, if one considers the volume-weighted average closing price per bwin.party share, of 83.87 pence, for the three months between February 14th and May 14th; and
  • A total valuation of approximately £898.3 million (or about USD $1.402 billion) for bwin.party’s entire issued and to-be-issued share capital.

888The deal, sweetened by 888 to where it was only a couple of percent shy of the GVC Holdings offer, saves bwin.party shareholders some of the implied risk involved in the GVC/Amaya bid.  Amaya is a highly leveraged firm and still faces some regulatory challenges with its largest poker brand, PokerStars, particularly in the United States.  Meanwhile, 888 will face relatively lower regulatory hurdles for both the acquisition and for ongoing licensing of the various bwin.party brands.

In touting the recommendation, which bwin.party’s directors fully disclaim as an “advertisement,” the following can be considered a top-line statement:

The 888 Board and the bwin.party Board believe the Offer represents a transformational opportunity for both 888 and bwin.party and offers the potential to enhance shareholder value. By combining the complementary businesses of 888 and bwin.party, the 888 Board and the bwin.party Board anticipate that the Enlarged Group will benefit from 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. To the extent the [transitional strategy] is approved and ultimately implemented by the 888 Board, it will reduce some of the identified cost synergies. However, the 888 Board will only implement the [] strategy if any shortfall in the synergies would be more than offset by the revenues gained and the value opportunity created.

Speaking of “transformational opportunity,” according to Brian Mattingley, the Executive Chairman of 888, “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 [meaning whatever the combination of 888 and bwin.party will be named] 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, the new Chairman of bwin.party, said this: “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.”

Exactly how much of that management team will remain in place once the deal moves forward and those “synergies” mentioned by 888’s Mattingley are uncertain.  Bwin.party has posted several years’ worth of continuously-flowing red ink, losing its former status as the number-two global online-poker business in the process.  The company has lost money across all segments, though particularly in online poker.  With the addition of the venerable but wounded PartyPoker brand to its stable, 888 may well be able to claim itself as the clear #2 in the global online-poker niche.

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