On Wednesday November 12th, bwin.party‘s Board of Directors confirmed via statement to the London Stock Exchange that the company has entered preliminary discussions with “a number of interested parties regarding a variety of potential business combinations” and that “such discussions may or may not result in an offer made for the Company.”
The statement was issued shortly after Financial Times Alphaville Editor Paul Murphy suggested on Market Live that newly-minted PokerStars owner Amaya Gaming was prepping a $1.2 billion takeover of bwin.party.
Read the full transcript of Market Live session here.
However, the London Evening Standard has gaming software development company and iPoker platform provider Playtech as the one interested in acquiring bwin.party after the latter announced that it “was raising a $315 million war chest, via convertible bond issue, for acquisitions and ‘organic opportunities'”.
In either case, bwin.party shareholders responded positively to the news, as the company stock soared 12.52% to 121.3p on Wednesday, effectively negating the losses of the prior five months.
Bwin.party’s recent woes
Rumors of a possible bwin.party takeover have been swirling since June, when Bloomberg reported that it was “considering selling some or all of the company”. Although Bwin denied the allegations, it’s now clear that the company is at least entertaining the prospect of an acquisition.
Bwin.party has struggled mightily of late, largely due to its poor performance in the online poker sector. According to data gathered from Pokerfuse Pro via PokerScout, 7-day cash game averages on PartyPoker have fallen an alarming 59% since February 2013, causing the former market leader to drop to sixth place in the global industry rankings.
In PartyPoker’s defense, the global iPoker industry hasn’t fared well as a whole, falling victim to the European economic crisis and the increased costs that come with national regulation. That being said, Party has underperformed the market by a more than 2-to-1 margin.
On a somewhat brighter note, the licensing partnership of the Borgata and bwin.party is currently the market share leader in New Jersey. However, it’s the Borgata, not Party, that has reported profitability.
Compounding matters further, bwin.party will soon face increased pressure in the U.S. regulated market when online gaming behemoth PokerStars throws its hat into the arena.
Bwin.party’s casino and bingo operations also experienced year-over-year losses from 2013 to 2014, which were only partially offset by a solid performance from sports betting. The company reacted to the poor showing by instituting a number of cost cutting measures and simplifying its strategic approach.
Will bwin.party be acquired as part of a takeover?
Given the extenuating circumstances and the recent statement issued by bwin.party, it does seem likely that all or part of bwin.party will be sold. However, at this point, who eventually takes over the company, and how/when the deal transpires is anyone’s guess.
Should Amaya acquire bwin.party, it would strengthen its position as the most dominant force in the online poker industry. While the prospect of gaining a near-monopoly over the iPoker market and a significantly stronger foothold in the sports betting and online casino spheres may sound enticing, consider that Amaya financed 95 percent of its $4.9 billion acquisition of the Oldford Group (parent company of PokerStars and Full Tilt) by debt.
In the comments section of the Financial Times Alphaville piece, stockbroking and advisory house Peel Hunt comments:
“Amaya, which was highlighted in the FT Alphaville story, is strategically looking to move into sports and build casino[s]; bwin.party would fit the bill. However, having just taken on significant leverage to finance the acquisition of PokerStars (concluded in August) and still being in the early states of integration, the timing would be strange.”
To which I concur. In order to acquire bwin.party, Amaya would willingly bury itself further in debt, and be forced to divide its strategic focus between two of the world’s largest digital gaming firms in PokerStars and bwin.Party – a lofty task by any stretch of the imagination.
It would be one thing if bwin.party, like PokerStars, was at the top of its game. But bwin.party is in the midst of restructuring, and will task any new owner with investing significant resources, both financial and in man hours.
In either case, any plans Amaya has for bwin.party will likely be revealed when the company publishes its financial figures on November 14.
Moving on to Playtech, the company was previously deemed a “bad actor” by Nevada’s poker regulators and failed to meet the stringent licensing application requirements imposed by NJ DGE, thus forcing it to temporarily abandon its plans to enter the Garden State.
Acquiring bwin.party would prove an excellent gateway into the U.S., and lines up nicely with Playtech’s stated strategy to focus on regulated markets.
The problem is cost. $315 million is not nearly enough to acquire the totality of the bwin.party enterprise.
One theory suggests that Playtech will purchase the online poker portion of bwin.party’s business, with Amaya acquiring its casino and sports betting operations.
Again, it’s all speculation at this point, but one thing is clear: major changes at bwin.party are on the horizon.
