18th May 2015 10:02
LONDON (Alliance News) - The takeover battle for FTSE 250-listed online gaming company Bwin.Party Digital Entertainment PLC ramped up Monday as 888 Holdings PLC gatecrashed the existing talks between Bwin.Party and smaller rival GVC Holdings PLC.
888 Holdings said it has submitted a cash and shares takeover bid for Bwin.Party, although it didn't detail the size of the offer. 888 said it thinks there is "significant industrial logic" in combining its business with that of Bwin.Party.
888 added that the deal would need to be approved by its own shareholders, and it has already secured the support of investors holding 59% of its share capital. It said there's no certainty a deal will be completed.
Bwin.Party confirmed it has received the proposal tabled by 888 and said its board and advisers are conducting a detailed review of the proposals it has so far received.
The offer comes after The Sunday Times reported that 888 was planning to enter the bidding for Bwin.Party, a frequent subject of takeover speculation which last week said it had entered talks with a number of potential bidders. Among those bidders is AIM-listed rival GVC Holdings, which confirmed on Friday that it was holding talks over a potential reverse takeover of the business.
GVC is significantly smaller in terms of market capitalisation than Bwin.Party, with a market capitalisation on Monday of GBP283.7 million, compared with Bwin.Party's GBP901.25 million. GVC generated net gaming revenue of EUR224.8 million in 2014, against EUR563 million for Bwin.Party. 888 is also smaller than Bwin.Party, with a market capitalisation of 583.3 million and revenue in 2014 of USD455 million.
Bwin.Party shares were up 9.9% to 109.3 pence on Monday, one of the best performers in the FTSE 250. The stock rose 11% on Friday on the back of the talks with GVC. 888 shares were down 3.4% to 163.938 pence on Monday, while GVC shares were up 1% to 463.00 pence.
Bwin.Party first said it had received several approaches about potential business combinations in November last year. At the time, media speculation had suggested it could be a target for Canadian gaming and online gambling company Amaya Group.
In March, Bwin.Party Chairman Philip Yea then said the company had received a number of indicative proposals and had entered talks with the companies that had tabled offers.
"Together with our advisers, the board has entered into a further stage of discussions with each party with a view to assessing the relative attractions of these proposals against the board's objective of creating additional value for shareholders," Yea said in March.
That came as the group posted a EUR97.9 million pretax loss for 2014, compared with a EUR44.9 million profit a year earlier, due to a fall in revenue and to a EUR104.4 million non-cash impairment charge booked on its poker operations.
Bwin has also been involved in talks over its social gaming business in the past year, in December saying that it had entered talks about the sale of the division. It has not provided any further information on the fate of the social gaming business since that announcement.
888 has also been the subject of takeover speculation, with its shares surging in February after the company entered talks with FTSE 250-listed bookmaker William Hill PLC. William Hill is understood to have run the rule over Bwin around the same time it entered talks with 888. Those talks eventually terminated after 888 was unable to come to terms on the offer with a key shareholder.
Will Hedden, a dealer at London Capital Group, said the entry of 888 into the race means the bidding battle for Bwin now looks "serious". "The other suitor to have revealed its hand for Bwin is GVC so with 888 now raising the stakes there is still a lot to play for before the party is over," he added.
Shore Capital analyst Greg Johnson likes the potential deal, saying that beyond geographic and product concerns it has on Bwin, its margins look to be taking a hit from significant product development costs and "ineffective" marketing investments.
"A combination with 888 could help address certain issues, especially around combined product development, which could generate significant margin accretion for the combined group through economies of scale," Johnson says.
By Sam Unsted; [email protected]; @SamUAtAlliance
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