BUSINESS

Consolidation key as 888 makes early move

TAGs: Barney Frank, PartyGaming, Playtech, Scientific Games

He who merges first merges longest

He who merges first merges longest

It’s still early in the year, but it seems that 2010 will be all about consolidation. It’s not exactly a sexy word but, in the gaming industry, it appears to be foxier than Joanna Krupa in a swimsuit and on more people’s lips than Tiger Woods on a night out in Vegas.

For starters the Bwin/PartyGaming merger talk won’t go away – and as we reported last weekif that happens there will be so many takeovers flying around it will be like a week down at Portsmouth football club.

But even if there is no catalyst provided by such a dangerous liaison between two of the industry’s biggest hitters, the competition is unlikely to sit on its hands. With the pro-gaming lobby’s attempts to revoke the Unlawful Internet Gambling Enforcement Act (UIGEA) gathering pace, UK and European online gambling companies are looking for any possible opportunity to strengthen in readiness for the hoped-for regulation and legalization of gambling in the US.

A victory for Barney Frank’s bill would trigger something of a Klondike Rush Stateside and the bigger the operator, the easier it will be to take market share. “I think 2010 is going to be the determining year,” an online gambling senior executive told Reuters recently. “I do think there’s going to be a domino effect, meaning the first deal gets everybody else to run. You don’t want to be the last one left without a partner.”

It comes as no surprise then that 888’s Chief Executive Officer Gigi Levy today revealed that the Gibraltar-based firm is on the brink of a mystery takeover, albeit a relatively small one, and, more crucially, in the “very early stages” of attempting to snare a major one. “The synergies between any two big operators would be around $40 to $50 million,” Levy told Bloomberg, before revealing his company was already seeking smaller acquisitions that would likely cost approximately $10m.

There are companies of course that have already got their fiefdom-building enterprises under way, such as Playtech, who have already made a strategic alliance with US lottery infrastructure provider Scientific Games. “We’re seeing the culmination of all these talks and I’d imagine we’ll see a lot more deals while we have the stronger winter trading period holding up valuations,” says Geetanjali Sharma, leisure analyst at broker Noble.

Playtech, 888, PartyGaming and Bwin have already posted good fourth quarter results. Playtech’s share of profits from its William Hill Online joint venture nearly doubled in its 2009 fourth quarter to £7m, 888’s fourth-quarter profit rose 14 per cent after adding customers who wagered more, PartyGaming’s bingo and casino operation saw profits shoot up 32% while Bwin’s profits soared a staggering 75% thanks largely to the success of their Italian operation.

These figures, though, will pale into obscurity compared to what they will reap if they get the chance to crack America. So over to you, Congressman Frank.

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