Empire Online owner sells shares to Party Gaming

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EMPIRE ONLINE OWNER SELLS SHARES TO PARTY GAMING

The consolidation wagon rolls on....

Israeli Internet entrepreneur and marketing expert Noam Lanir has sold his remaining shares in Empire Online to Party Gaming for US 40 million, the Y-news site reports this (Wednesday) morning.

A year and a half after the company listed on the London Stock Exchange, the indications are that Lanir is heading out of the online gambling business. He has revealed that he will use the revenues from the sale of Empire, which total USD 300 million, to invest in real estate.

The deal with PartyGaming, the world's largest operator of gambling Web sites, is expected to be finalised by the end of the week.

Some (Israeli) experts interpreted the move as a signal that the two remaining Israeli online gambling companies traded on the London Stock Exchange, 888.com and Playtech, may be making similar moves following the enactment of the Unlawful Internet Gambling Enforcement Act which bans US financial transactions to online gambling sites.

Empire was worth US $928 million when first traded in London, but its shares fell significantly in recent months. The company has an estimated value of US $244 million today after its shares fell by 80 percent.

 

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UPDATE

PARTY GAMING AND EMPIRE CONFIRM SALE TALKS (Update)

Remember Lanir's purchase of 30 million shares last month?

Both Empire Online and Party Gaming spokesmen today (Thursday) confirmed yesterday's media reports (see previous InfoPowa bulletins) that a sale of the former was being discussed.

Discussions on a sale of Empire's gaming business and assets are at an "advanced'' stage, Empire said today in a statement reported by both Reuters and Bloombergs news services.

PartyGaming, which disclosed its involvement in a separate statement, was Tortola, British Virgin Islands-based Empire's main customer before the companies became legal adversaries in a case that was later settled. Empire was one of four "skins,'' or marketing partners, that fed players to poker tables at the PartyPoker.com Web site. PartyGaming agreed in February this year to pay $250 million to settle a lawsuit that Empire filed after its players were barred from sharing tables on an improved poker platform at Party Poker. Party bought two of the other skins, and the third left its (old) platform.

Internet gambling operators are scrambling to replace lost sales following the October enactment of the U.S. Unlawful Internet Gambling Enforcement Act, which has separated companies including PartyGaming and Empire from their main revenue sources. Consolidation in the industry is inevitable, say analysts.

"This is the aftermath of what happened in the U.S.,'' Alex Kyriakidis, a managing partner at Deloitte & Touche in London, said of today's announcement.

Empire, the owner of Web gaming brands including Noble and Titan Poker and Club Dice, plans to use its substantial cash reserves to become an investment company if it sells its gambling business, company spokesmen confirmed. Empire's Internet casino generated revenues of $30.2 million in the first half of 2006, while its Internet poker site generated $8 million.

U.S. gamblers accounted for about 85 percent of sales in 2005 at PartyGaming and around 65 percent of Empire's revenue when the company said it would no longer accept wagers from Americans.

Earlier this year - three weeks before the United States banned Internet gambling financial transactions - a source close to Empire told Reuters the group was planning to invest its $250 million cash pile outside the online gambling industry, and it has been suggested that property development may be one new direction for the group.

"Shareholder approval would be required for a disposal of the company's trade and gaming related assets and in order to approve the company's investing strategy," an Empire Online spokesperson emphasised. "The proceeds of any disposal would be used together with the company's existing cash of approximately $250 million to invest opportunistically in both private and public businesses and across the small, mid and large-cap range of companies," he added.

Noam Lanir, Empire's founder and chief executive officer, owns a stake in the company of almost 33 percent, according to data compiled by Bloomberg. The holding is worth some GBP 41.7 million ($82 million) at the stock's current price, based on a percentage of the entire company's market value. Lanir bought 30 million shares on November 7 (see previous InfoPowa report).

The U.S. measures have spurred at least one other Internet gambling company to quite the industry. Shares in Australia-based Betcorp Ltd., which also generated most of its revenues from American gamblers, are no longer traded in London after the company sold its entire wagering business last month to the Bodog group, which operates from Costa Rica.

A PartyGaming spokesman vehemently denied Internet rumours circulating yesterday that the group was planning to re-enter the U.S. Internet gambling market.

 

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Deal confirmed - and IOC, too

PARTY GAMING ONLINE GAMBLING BUYING SPREE (Update)

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.

 

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Sequel

LANIR STILL CONFIDENT IN EMPIRE ONLINE FUTURE

He may have sold up to Party Gaming, but this Internet entrepreneur is still investing

Israeli Internet marketing entrepreneur Noam Lanir recently baled out of the online gambling sector by selling his Empire Online group to Party Gaming for almost $38 million, but he clearly still has confidence in the company's future, reports The Times, disclosing that the thirty-something executive is still buying up shares.

The newspaper reported: "Chief executive Noam Lanir, through his company Groverton Management, has shown his confidence in the move by snapping up 5.5 million shares for GBP 2.34 million"