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Hostile Takeover Possible if GVC Doesn’t Win Over bwin.party Board

I’m not saying that a £1 billion deal wasn’t already in “serious” territory, but according to London-based newspaper The Times, the tension in the battle over internet gaming firm bwin.party has ratcheted up yet another notch. Now it’s REALLY getting serious. On Wednesday, The Times reported that GVC Holdings could attempt a hostile takeover of bwin.party if bwin.party’s Board of Directors sticks with rival 888 Holdings’ offer.

Earlier this week, I made a silly eBay analogy to illustrate how GVC and 888 are trying one-up each other in fighting for bwin.party’s affection, but GVC Chairman Lee Feldman now sounds like that guy who just refuses to give up on the auction, even if the price for that Raymond Burr autographed picture has soared way past what is reasonable. Feldman is the bidder who is willing to contact the seller directly to try to lock down the purchase, skirting eBay altogether.

He told The Times that while he is “confident our offer will be recommended,” he will do whatever it takes to buy bwin.party. GVC is “not prepared to walk away.”

bwin-party-logoOne possible tactic would be to pursue a hostile takeover if the bwin.party Board of Directors fails to recommend GVC’s offer to shareholders. “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.

In a hostile takeover bid, a buyer attempts to acquire a company even when the target company’s Board is against it. The bidder could use a number of strategies to accomplish this, such as buying up a controlling stake of outstanding shares on the open market (you often see this in movies) or convincing shareholders to replace Board members with ones that will approve the sale. If GVC were to go hostile, it would likely go directly to shareholders with an offer, ignoring the Board.

Among the many problems with acquiring a company via hostile takeover is that if the Board and key executives are not in favor of the sale, there is a good chance they will be replaced when the company changes hands. This could lead to disruptions in the acquired company, causing further issues down the line.

The bidding war for bwin.party goes back about two months. On July 9th, GVC Holdings announced that it had made a proposal of 110p per share for bwin.party, making the purchase price about £907 million in total. GVC, owner of Sportingbet, was unable to afford this price on its own, so it brought in PokerStars and Full Tilt parent, Amaya Gaming, to be its partner in the deal.

About a week later, 888 Holdings put in its proposal. It was lower than GVC’s – 104.09p per share (£858 million), but bwin.party’s Board actually ended up recommending it to shareholders, rather than the more lucrative proposal. The Board cited corporate synergies as the primary reason, but many believe that Amaya’s inclusion was also a problem, as popular opinion was that upon the sale, bwin.party was going to be split up, with partypoker going to Amaya and the sports betting and casino gaming businesses going to GVC.

On July 27th, GVC announced that it had submitted a juicier proposal, this time boosting its price to 122.5p per share, putting the total deal just over the £1 billion mark. Because of the structure of the proposal and current share prices, GVC’s offer is actually up to 129p per share right now.

In the meantime, bwin.party’s Board was still recommending 888’s lower offer, though the company was hammering out some details with GVC. This week, on September 1st, bwin.party confirmed that it has received another proposal from 888, though it did not reveal any details. The Times reports that a source close to the situation says that 888’s offer is for 115p per share, a good deal higher than its original proposal, but still significantly lower than GVC’s.

UK newspaper The Independent reports that bwin.party told 888 on Saturday that it was going with GVC’s higher offer, which is probably why 888 came back with a revised proposal.

In its latest offer, GVC also got rid of Amaya and instead moved forward on its own with the aid of a hefty loan from Cerberus Capital Management. Thus, it appears that, should GVC win the battle, bwin.party would not be broken up. That may be the case, but GVC is prepared to do whatever it needs to do in order to acquire bwin.party. If that means keep things as is, great. If not, so be it. The Independent quoted a senior GVC source as saying, “Our intention is to run it as it is, but if you get a price that is in the interest of shareholders to dispose of certain things then we’ll dispose of things.”


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