Online gaming group 888 has made a takeover approach to rival Bwin.party digital which could create a merged business worth more than £1bn.
In a statement confirming its approach, 888 said the board believes there is “significant industrial logic” in a combination of the two companies. It cautioned, however, that there could be no certainty that its proposed offer will be accepted by Bwin and said that a further update would be provided in due course.
Bwin, which was put up for sale last November, confirmed on Friday it had received a number of approaches, including one from smaller rival GVC Holdings, regarding “a variety of possible business combinations.”
On Monday it confirmed the 888 approach and said that the board and its advisors “are conducting a detailed review of the proposals received to-date and will make a further announcement in due course.”
Other names linked with Bwin in the past include Canada’s Amaya, the company behind Pokerstars, and software supplier Playtech. In March the company’s then chief executive, now chairman, Brian Mattingley, said 888 was “constantly appraising opportunities” and needed to get critical mass.
Analysts said important synergies between 888 and Bwin were likely, since a merged group would be able to cut fixed costs such as licensing in regulated markets and marketing spending. Bwin would also expand 888’s operations since it has a larger sports betting business.
Any deal would be likely to be seen as a reverse takeover since 888 is worth £600m, less than Bwin’s market capitalisation of just over £800m. Aim-listed GVC is valued at around £280m. Shares in Bwin rose 6% to 105p after confirmation of 888’s interest.
888 was itself a bid target for William Hill earlier this year but talks broke down over price. The Shaked family, one of the company’s founders, believed the offer of 200p a share from William Hill was too low. But it is believed they are likely to back any bid for Bwin, despite 888’s shares falling back after the failure of the William Hill deal, closing at 169.75p on Friday.
Bwin itself was formed from the merger of London-listed PartyGaming and Austrian group Bwin in 2011, but saw earnings fall 6% last year due to weakness in the European poker market and a Greek move to block gambling websites. This was the third straight annual fall in earnings, leading to increased cost cutting.
It also faced pressure from US activist investor SpringOwl, which successfully agitated for boardroom changes.
Any takeover of Bwin would continue a pattern of deals in the gaming sector. Apart from William Hill’s unsuccessful move on 888, private equity group CVC Capital bought Sky Bet after failing to buy Betfair.
GVC itself bought Sportingbet’s operations in 24 countries in 2013, and the business now accounts for more than half of its revenues.
