Ladbrokes, 888 Revisit Merger Talks

Four years ago, Ladbrokes and 888 Holdings had a merger deal in place. Four months later, the deal was off. Now, as the calendar is about to read 2011, the Financial Times reports that discussions have been rekindled, as Ladbrokes is considering a bid for its smaller rival.

The offer would reportedly be for 70 pence per share, giving the deal a total value of £240 million. While no formal offers have been extended yet, 888 shareholders are probably wishing things had worked out a few years ago. The previous offer was rumored to be for 140 pence per share, twice what the new one will supposedly be.

Back in 2007, talks fell apart largely because Ladbrokes was nervous about possible legal problems for 888 in the United States, as the Unlawful Internet Gambling Enforcement Act (UIGEA) had recently been passed. Those same issues may still arise, as 888 has not reached any settlement with the U.S. Department of Justice over the business it did in the past with U.S. customers.

Nick Batram, an analyst at Peel Hunt, told the Financial Times, “Clearly, the mere fact that they’re sitting down shows the risk appetite is higher now, under Richard Glynn, than it was. It’s not as if Ladbrokes doesn’t know about the U.S. situation.”

Shares of 888 Holdings climbed sharply on the news, up 8.75 pence to 57.75 pence, a gain of 17.9%. As is the case with most merger news, Ladbrokes, the possible buyer, saw its stock price fall. The damage was minimal, however, as its shares declined 1.5 pence to 126 pence, just a 1.2% drop.

In August, 888 CEO Gigi Levy told eGaming Review that it was “highly likely” his company would discuss a merger with another player in the online gaming industry within six months. Party Gaming and bwin had announced their merger shortly before Levy made his statement, so many thought that 888 was just trying to keep up with its competitors.

Levy refuted that sentiment, saying, “I think that the first thing to remember is that the consolidated Party-bwin, when the transaction is completed, will represent less than 10% of the market. We are not talking about someone controlling 50% of the market, giving us no chance to compete. We are talking about an entity that is significantly larger than us, but still is less than 10% of a very fragmented market. In that regard, I don’t see us changing anything in our strategy because of that.”

On the poker front, a Ladbrokes/888 combination would be nary a blip on the radar. According to PokerScout.com, 888poker, also known by its historical name, Pacific Poker, is the 16th largest poker room on the internet, with a seven-day average of 1,260 cash game players. Ladbrokes is a member of the Microgaming Network, but has averaged just 34 cash game players of its own over the last seven days.

Poker is not likely to be the focus of a merger, though. 888 is a major player in the online casino realm, while Ladbrokes is one of the top sports books in the industry. In addition to its online presence, Ladbrokes has many brick-and-mortar betting shops around the United Kingdom and across Europe. Said Batram, “It offers both sides solutions. 888 hasn’t got economies of scale to compete in regulated markets and Ladbrokes needs internationalization and better marketing.”

As mentioned earlier, Party Gaming and bwin announced a merger of their own earlier this year and just last week, Party Gaming noted that everything was on track to be completed in the first quarter of 2011. The new company will be an internet gambling giant, as both have significant global footprints; bwin, in particular, is a formidable force in sports betting.

As far as poker is concerned, PokerScout’s numbers show that the combined poker room would sit comfortably in the number three spot behind PokerStars and Full Tilt Poker. PartyPoker is currently the third largest poker site on the internet, but it is constantly jockeying for position with the iPoker Network. The merger with bwin’s Ongame Network, which currently ranks fifth, would create a network with a seven-day average of 6,300 cash game players.

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Poker talk:

OPEN-HANDED - A category of games characterized by a part of each player's hand being exposed.
NICKEL - Five dollars, usually represented by a red casino check.
TOURNAMENT - A highly structured game involving potentially dozens of tables where all participants pay an entry fee and obtain a fixed number of chips. Once a tournament has started, additional players may not enter. As the game progresses players bust out and are eliminated until only one winner remains.
SUITED - Two or more cards all the same suit. Ant: OFF-SUIT.
BLACK - When referring to chips, black usually stands for $100 casino chips. "This guy sits down with a stack of blacks and raises the first bet." Not ALL casinos use black for $100 but that is the common usage.
HIT - To make a hand or catch a card or cards that improves one's hand. "I hit a gut-shot draw on the river."

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