Leisure & gaming in the post US era

PartyGaming Is in Talks to Buy Empire Gaming Business (Update3)

Who is Neil Craven????? Is it this guy????

By Neil Craven

Dec. 28 (Bloomberg) -- PartyGaming Plc said it's in talks on purchasing Empire Online Ltd.'s Web gambling activities after a U.S. crackdown on Internet wagers wiped out more than half of the companies' revenue.

Discussions on a sale of its gaming business and assets are ``advanced,'' Empire said today in a statement. 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.

Internet gambling operators are scrambling to replace lost sales after the U.S. clampdown, which has separated companies including PartyGaming and Empire from their main market. Combinations in the industry are inevitable, analysts including Mark Brumby at Oriel Securities in London have said.

``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 Club Dice, plans to become an investment company if it sells its gambling business. Gibraltar-based PartyGaming, the world's biggest online poker operator, approached the company in November 2005 about a takeover.

Poker Tables

Stock in PartyGaming rose 2.25 pence, or 7.6 percent, to 32 pence in London, closing at the day's highest price. Shares of Empire fell 2 pence, or 4.6 percent, to 42 pence, erasing an advance of as much as 6.8 percent.

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 to pay $250 million to settle a lawsuit that Empire filed after its players were barred from sharing tables. The poker company bought two of the other skins, and the third left its platform.

Online gambling shares have slid in 2006 as two managers of U.K. Internet bookmakers were arrested in the U.S. and American lawmakers unexpectedly passed a law that criminalizes processing of credit-card payments for Web gaming. PartyGaming stock has plunged 77 percent this year, leading declines in the 27-member FTSE 350 Travel & Leisure Index, and Empire has lost 38 percent.

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 in October it would no longer accept wagers from Americans.

Chief Executive's Stake

Investors paid 116 pence each for PartyGaming shares when the securities were first sold to investors in June 2005. Empire shares cost 175 pence apiece in the company's initial public offering, which took place the same month.

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 about 40.2 million pounds ($79 million) at the stock's current price, based on a percentage of the entire company's market value. Lanir bought 30 million shares on Nov. 7, Empire has said.

Stock in Web casino operator 888 Holdings Plc rose 9.1 percent on Nov. 6 after bookmaker Ladbrokes Plc said it may make a bid. Acquisitions may boost ``liquidity,'' or the number of players available to join games, at online poker rooms, according to Warwick Bartlett, a partner at Global Betting and Gaming Consultants in West Bromwich, England.

The U.S. measures have spurred at least one other Internet gambling company to quit the industry. Shares of South Yarra, Australia-based Betcorp Ltd., which also got most of its sales from American gamblers, have stopped trading in London after the company sold its entire wagering business last month.

Stock in 888, whose brands include Casino-on-Net, fell 1.5 pence, or 1.1 percent, to 131 pence in London. Sportingbet Plc, the online bookmaker that owns Paradise Poker, rose 2.25 pence, or 5.3 percent, to 44.5 pence.