Bwin in talks with PartyGaming on potential merger

The talks are “no indication” that there will be a merger, Vienna-based Bwin’s head of investor relations, Konrad Sveceny, said in a telephone interview from Vienna. PartyGaming said in a statement it’s in talks with “a number of companies” about potential consolidation, adding only that the discussions are at “a preliminary stage.”

PartyGaming rose 6.2 % in London trading. Bwin shares advanced 3.2 % in Vienna. “We are in talks with a lot of competitors,” Sveceny said. “Some of these talks are successful - such as those with Italy’s Gioco Digitale - some end without any result.”

European online gambling market is the world’s largest, at us$ 8.7 billion in 2009, Barclays Capital analysts including Ed Birkin said in a research report in October. No European gambling operator currently has a dominant position. Among publicly listed operators, Bwin has the largest European market share by revenue with 8 %, followed by PartyGaming with 6.3 % and William Hill Plc, the U.K.’s second-largest bookmaker, with 4.5 percent, according to Barclays Capital.

“The low combined market share of the top European operators illustrates how fragmented the industry is, and that consolidation will likely take place in order for companies to remain competitive,” Barclays Capital wrote in the note.

Europe will see a wave of mergers and acquisitions among gambling companies as the region’s countries allow more Internet betting, Bwin Co-Chief Executive Officer Norbert Teufelberger said in October. PartyGaming owns the PartyPoker.com brand.

Governments are relaxing prohibitions on online gambling through foreign companies to bring currently illegal activity under the umbrella of taxation and regulation. Online gambling that is considered illegal, or not under the purview of local laws, is estimated at about 3 billion euros (us$ 4.2 billion), according to Simon Holliday, director of H2 Gambling Capital, a Manchester-based market research firm.

In July, Gibraltar-based PartyGaming agreed to buy Cashcade Ltd., a bingo provider, for as much as us$ 155 million. In September, Bwin said it would buy Italian Gioco Digitale S.p.A. for up to 50 million euros cash and 2.3 million Bwin shares to boost its presence in the newly opened market.