The takeover battle for the Bwin.party online gambling company has had more twists than an all-night blackjack session. To recap, Bwin’s Austrian founders merged the business with Party Gaming in a widely criticised deal in 2011. After an elbow in the ribs from the activist investor Jason Ader, Bwin.party put itself up for sale last November and, eventually, received interest from two rivals.
One of these, 888, is an established, mainly casino games business which has been turned around by the veteran leisure tycoon Brian Mattingley. The other is GVC Holdings, a vehicle set up under a savvy deal maker called Kenneth Alexander to buy and merge online betting groups. Both companies are funding their offers with a mixture of cash and shares, which means Bwin’s investors – including its all-powerful boss Norbert Teufelberger – have to think hard about whose stock they most want to own.
Surely on this reckoning 888 is the better option. The combined group (which would not feature Mr Teufelberger on the board) would be a big, strong player in both casino games and sports, where 888 is keen to grow.
GVC has a decent sports business in Sportingbet but it’s hard to see what it’s going to do with Bwin’s casino operations. At first, it was going to team up on the bid with the controversial PokerStars owner Amaya. That made strategic sense, but the Amaya connection is thought to have put off blue-chip investors. Now GVC is going it alone and says it will run the casino arm itself. Personally, I can’t see that happening. Far more likely is that GVC would break up the casino stuff and sell it for cash.
Although Mr Teufelberger’s crew have accepted 888’s 104p-a-share offer, GVC “sources” declared through the press that it was prepared to offer 130p and – get this – beat any future increased offers from 888.
This just sounds too good to be true. By some estimates, a 130p bid could involve GVC having to issue four times its current number of shares to investors to fund the deal, meaning Bwin shareholders end up with 70 per cent of the combined business and 70 per cent of the combined risk. With 888, the ownership is more like 50-50.
While Bwin has provisionally accepted the 888 offer, it is apparently now deciding whether to switch allegiance.
It should think carefully. If the market shies away from GVC and its shares fall before the deal, or the merged business turns out to be a dog, that 130p-a-share paper valuation will shrink very fast indeed. My advice to Norbert and Co? Stick.
