April Fools – Merging Markets

Mergers in the iGaming industry

Mergers in the iGaming industryThe gaming industry continues to see a massive shift towards consolidation and it’s likely this trend will continue. A year ago, it was thought that if PartyGaming and bwin were to merge, it would cajole the likes of 888, Sportingbet and Playtech into making similar moves. Traditional betting firms like Ladbrokes, William Hill and Paddy Power were also expected to make acquisitions to boost their online presence.

PartyGaming and bwin completed their merger 31 March 2011. Shareholders from bwin will receive 12.23 bwin.party depositary interests for each of their bwin shares, which can then be traded on the London Stock Exchange.

With this merger in the books, rumours continue concerning Sportingbet acquiring their Scandinavian rival Unibet. Given Sportingbet’s current financial position, analysts aren’t convinced that Sportingbet has or can raise the capital required for such a move. This isn’t their first attempt at a merger, last year Unibet pulled out of the proposed $600M merger.

The online gaming industry continues to show tremendous growth, as a result, many companies are viewing public floats as a means for further product expansion and development. In this period of consolidation many firms see using the proceeds of their initial public offerings to fuel acquisitions of rivals as effective method to facilitate expansion.

After Sportingbet paid out $30M to the US to settle investigations, as far as public companies go, this should be considered an attractive merger and acquisition player in the consolidating betting sector. If it is at all financially feasible, Sportingbet should continue to pursue the acquisition of Unibet, which will serve to give the company a strong presence in the Scandinavian market and have a positive effect on the company’s shares.

To keep pace, perhaps Ladbrokes might look to re-visit their take-over bid of 888.com which was derailed in 2007. Caesars Entertainment Group has already formed a business-to-business agreement with 888 that would allow Caesars to offer online games in the UK, thus making 888 even more attractive.

Ladbrokes may also look to revisit a merger with Playtech, but they will have some negotiating to do, and plenty will depend on what WHO decides to do with the minority stake Playtech already holds. Upon Ladbrokes last attempt to acquire the software giant, William Hill filed an injunction that effectively derailed the merger.