PARTY GAMING ONLINE GAMBLING BUYING SPREE (Update)

4 January 2007

Betting group snaps up two Internet betting groups for total of $66.3 million (GBP 33.7 million) in shares.

Party Gaming ended 2006 with a bang this week, splashing out on the acquisition of both Empire Online group and online casino operator Intercontinental Online Gaming to the tune of GBP 33.7 million (US$ 66.3 million) in shares. Party will fund the acquisitions by issuing 115.2 million new shares, according to a statement from the company.

The announcement that the deal was done drew a line under the extensive reportage and rumour that has been a feature of industry happenings this week as analysts predicted more consolidation moves in the industry, and speculated on what Empire will do as an investment group following its departure from the industry.

The deal will see Party Gaming take control of online gambling sites such as Noble Poker and Club Dice casino from Empire's stable, and Magic Box Casino from IOC.

In a statement, PartyGaming said it expected Empire's Web sites to generate core profit of more than $6 million in 2007, while Intercontinental's sites, including MagicBoxCasino.com, will generate more than $2.5 million.

"These acquisitions represent excellent value for our shareholders and are consistent with our strategy," said Party's chief executive Mitch Garber.

"The addition of a number of well-known secondary brands will provide opportunities for cross-promotion, increasing customer choice and satisfaction and maximising the long term value of current and future players."

Roughly $10 million of the $48 million in stock that Empire Online is receiving will be transferred to an account for employees of Empire Online who will join Party Gaming.

"They bring incremental EBITDA and strong management with excellent marketing skills that will help us to accelerate our promotional plans for each of our individual products, particularly in casino which will continue to be spearheaded by Party Casino," said Garber.

Following completion of the sale, Party Gaming will approach the gambling software provider for Empire and IOC, Playtech to negotiate a deal, the spokesman added.

Empire spokesmen said the recent crackdown on internet gaming financial transactions in the US, where most of its business was based, had made it impossible for it to stay independent. The group will retain about $40 million, which will be combined with its existing cash pile of $250 million to establish a fund for investing in equities, bonds, derivatives and real estate.

Up to 50 percent of its funds will be put into bonds, up to 30 percent in stocks, up to 30 percent in real estate, up to 20 percent in absolute return funds and up to 10 percent will be earmarked to derivatives, Empire said.

PartyGaming also had good news for its remaining staff, saying that the group would compensate employees for damage to its incentive scheme when the United States effectively banned online gaming in November, wiping about three-quarters off the value of its shares.

Chief Executive Mitch Garber will receive shares and a minimum bonus of GBP 2 million for staying at the helm through 2007.

PartyGaming's operations have improved since the Unlawful Internet Gambling Enforcement Act came into force in the USA (see previous InfoPowa reports). Gross daily poker revenue averaged $721 000 a day in the four weeks to Dec. 11, having hit a low of $637 000 after the law was passed.

Despite the loss of substantial American business occasioned by its withdrawal from that market, Party managed to sign up an average of over 1 400 new customers a day since the ban went into effect. Garber has revealed that the group will now be focused on Europe, Middle East and Africa, which represent 80 percent of new player sign-ups and 67 percent of gross daily revenue. He also intimated last month that he had a competitive acquisition strategy in mind.

Online Casino News courtesy of InfoPowa

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