GVC Holdings to Acquire bwin.party for £1.1 Billion

It looks like GVC Holdings didn’t have to go with the hostile-takeover route after all. After a week full of news on the courting of bwin.party, both companies have announced an agreement in which GVC will acquire bwin.party for approximately £1.116 billion (USD $1,697 billion).

It is a combination cash-and-stock deal. For each share of bwin.party, bwin.party shareholders will receive 25 pence plus .231 shares of GVC Holdings. While this of course means the value of the deal will fluctuate every day, as of market close on September 3rd, GVC’s stock was at 453 pence per share. Thus, the stock portion of the purchase is for 104.643 pence per bwin.party share, bringing the total price to 129.643 pence per share.

Share of GVC Holdings are currently down on the London Stock Exchange, falling 4.64 percent to 432 pence. Shares of bwin.party are also lower, down to 111 pence, a drop of 3.65 percent. It is completely normal for the stock of the acquiring company to drop, and considering the financial markets are down worldwide, it isn’t surprising to see bwin.party’s stock down, either.

The news comes after a busy week of oftentimes vague reports. GVC, owner of Sportingbet, made its initial offer in early July, proposing a purchase price of 110 pence per share for bwin.party. Because of the size difference between GVC and bwin.party, GVC needed assistance in affording the purchase, so it enlisted Amaya Gaming, parent company of PokerStars and Full Tilt, to join it in the deal.

bwin-party-logoJust over a week later, 888 Holdings, which had been interested in bwin.party for a long time, made its proposal for 104.09 pence per share. Even though it was lower than GVC’s, the bwin.party Board of Directors recommended it to the company’s shareholders, citing numerous corporate synergies that would have potentially made the combination with 888 go more smoothly. Common belief was also that bwin.party didn’t like the idea of Amaya Gaming being involved, as it may have meant that bwin.party would’ve been split apart after the sale, with partypoker going to Amaya and the sports betting and casino gaming arms going to GVC.

On July 27th, GVC announced that it had increased its bid to 122.5 pence per share in what looks to be essentially the same deal as it has in place now. The lower price has to do with GVC’s lower stock price at the time. One of the major differences in the new offer was elimination of Amaya. Instead, GVC obtained a €400m senior secured loan from Cerberus Capital Management to help finance the purchase.

Despite GVC’s higher bid, bwin.party was still recommending 888’s offer to shareholders. In the meantime, though, bwin.party and GVC were in talks to hammer out some of the details, including any concerns bwin.party may have had.

So now we arrive at this week. On Tuesday, bwin.party announced that it had received a new proposal from 888, though it did not say for how much. London-based newspaper The Times reported that the offer was for 115 pence per share, still much lower than GVC’s offer. UK newspaper The Independent said that bwin.party told 888 on Saturday that it was going to take GVC’s offer, which may have been what prompted 888 to increase its bid.

Then, on Wednesday, The Times reported that GVC Chairman Lee Feldman said that GVC was going to acquire bwin.party come hell or high water, saying, that the company was “not prepared to walk away.” He was so intent on buying bwin.party that he said GVC would consider a hostile takeover attempt if necessary.

“We don’t see (going hostile) as necessary right now as we’re offering a higher price and have a better operating track record. That said, we believe GVC should own this asset and we wouldn’t exclude any strategy,” Feldman told The Times.

Fortunately for all involved (except 888), that won’t be necessary as it now appears that GVC has won the day. In that same piece in The Times, Feldman said that his company does not intend to break up bwin.party, but he would do so, if necessary.  “Our intention is to run it as it is,” he said, “but if you get a price that is in the interest of shareholders to dispose of certain things then we’ll dispose of things.”

In the announcement, GVC’s CEO Kenneth Alexander expressed his excitement, saying:

GVC is the natural partner for bwin.party considering our strong sports betting and online gaming pedigree. Sports betting is in our DNA and leveraging GVC’s experience of successfully acquiring and restructuring online gaming businesses, notably Sportingbet in 2013, we look forward to merging the two operations to deliver long term value for combined shareholders. GVC has been working closely with bwin.party’s management and has identified many talented individuals with whom it looks forward to working to ensure the future success of the enlarged business.

So was the better price the reason bwin.party went with GVC’s offer after being set on 888 for so long? Probably. Philip Yea, Chairman of bwin.party, said:

In recommending the Offer from GVC, the Board has taken into account many factors including, but not limited to, the headline value per share and the consideration being offered, the level, timing and deliverability of the financial synergies to be generated and the enlarged Group’s growth strategy in an increasingly competitive marketplace. As a result of these and other factors, including the proven track record of GVC’s management team in creating substantial value for shareholders, after a carefully managed and diligent review process, the Board has withdrawn its recommendation for the 888 offer and is now advising bwin.party shareholders to vote in favour of the Offer from GVC.


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