Poker giants show their hand over us$ 3.2 billion merger

A merger would mark another chapter in PartyGaming’s colourful history. Four years ago the group, which attracts 79 million players a day, floated when the craze for internet poker was booming. It was given a value of us$ 8.1 billion and its four founders raised almost us$ 1,6 billion from the sale of shares.

The flotation led to huge controversy because PartyGaming warned in its prospectus that America’s Department of Justice “considers that companies offering online gaming to US residents are in violation of existing federal laws”.

America was the group’s biggest market, accounting for nearly 90% of its revenues. The company struggled to assemble a board and was forced to offer big share packages to attract people. Michael Jackson, the former chairman of Sage, the software group, was given a us$ 2.4 million fee to become chairman.

A year after floating, the company suffered a huge setback when America made internet gambling illegal. Groups including PartyGaming closed their American operations and lost huge amounts of revenue.

Speculation about consolidation in the online gaming sector has been rife in recent months. A tie-up between PartyGaming and Bwin would be logical given the former’s ambition to grow its presence in sports betting, an area where the Austrian group has particular strength.

PartyGaming, based in Gibraltar, is best known for offering poker and casino games. It seems likely that if the two businesses can agree a tie-up, the deal would be structured as a merger of equals.

In April this year, Party Gaming agreed a settlement with America’s Department of Justice to ensure that it would not face prosecution over its activities in the United States. It agreed to pay us$ 105 million as part of the arrangement.

Analysts believe that gambling groups including London-listed 888 Holdings and Sportingbet as well as Sweden’s Unibet, have all been examining possible deals.