Consolidation in the online gaming market is happening in a big way this week, as one of the industry’s household names seeks to take over what some call the world’s largest online casino operator.
The would-be buyer in the acquisition is UK-based sportsbook provider Ladbrokes, which put forth an offer of £240 million ($372.25 million) on Thursday, to buy up 888.
The bid represented a buyout of 70p ($1.08) per share, some 61% higher than the asking price at that time. Immediately the effect on investors was dramatic: On Friday, 888 share prices increased 13% and by Monday had risen 18.4% to 59p (91.4¢) per share. Meanwhile, Ladbrokes shares shed 1.5% to decrease to £1.262 ($1.96) per as Peel Hunt analyst Nick Batram wondered in British press whether shareholders might “question if the company is backing the right horse.
”Despite lack of success in past flirtings with 888 and the fact that the business’ peak may have passed, however, Merrill Lynch analysts still like the deal, stating that “Strategically the deal … makes sense” and “As well as the strong product overlap, we think the geographic mix is complementary.
”Most observers see the move (and potential future moves similar to it) as a response to the huge impending merger between Party Gaming and bwin Interactive, a titanic union of poker, casino and sportsbook resources: A reality that might finally cause the Shaked Family, which owns 888, to sell.
In addition, while Ladbrokes’ £240 million offer sounds excellent, this represents about 50% of the company’s valuation at the beginning of the year – a said state of affairs, considering that liquidating 888 right now would earn less than 30% of said valuation and of the original IPO floated five years ago.
While a Ladbrokes/888 merger might represent just the second massive merger of this type, it surely won’t be the last in the ever-changing online gaming industry.
Here’s to thinking that 2011 sees much more of these sorts of consolidation efforts.
21 December, 2010