Bwin Billion Plus Offer from GVC
Online gambling firm 888 wins massive $1.4 billion payout
The online casino and poker firm 888 has always been a move and a shaker in the realm of internet gambling. Now, their stock has literally went through the roof with the latest news. In a spirited and exhausting turn of events, 888 won the battle for the acquisition of a rival firm, Bwin.party Digital Entertainment on Friday. They paid an astonishing 900 million pounds ($1.4 billion) for the privilege. 888 itself rejected a takeover bid by Britain's larger bookmaker William Hill last February. During the current acquisition process they had been battling against a 908 million pound offer from rival GVC Holdings for Bwin as well.
The latest big deal is the latest in a flurry of activity in the online gaming industry. The dominant culture in Britain is probably going to continue to promote this type of behavior because firms will be looking to expand in order to avoid increasingly high taxes and tighter regulation. Merging also has the added benefit of an increased technology speed and more advanced marketing prowess.
Many individuals have been enthusiastic about this merger, including Brian Mattingley, the Executive Chairman of 888. He recently told Reuters that he felt very strongly that this merger would create one of the world's leading gaming operators. Mattingley also believes that the merger was important because the bigger the size of a company, the easier it is for them to be able to ride out storms and capitalize on opportunities that might come their way.
888 sealed the deal for the merger by offering the company 104.09 per share (which consisted of 39.45 pence in cash and 0.404 new shares of 888) is impressive because over 16 percent higher than Bwin's share price of 89.40 pence before the merger talks began in mid-May.
Of course, one thing that Bwin had to take into account was the fact that 888's offering was lower than rival GVC Holdings' offering of 110 pence per share. Although appealing, Bwin elected to go with 888 because their offer carried significantly lower risks.
The deal was also welcomed by one of Bwin's largest shareholders, one Jason Ader from the States. He believes that the move is good because there will be significant long-term synergy value because of it.
The combination of the two groups will lead to a company with revenue of over $1 Billion and an incredible online gaming presence in countries such as Belgium, Germany, Italy, Denmark, Spain, Italy, and the U.K.
Bwin, an online gambling company formed in 2011 by the merging of PartyGaming plc and Bwin Interactive Entertainment AG has been struggling with the decline of regulated poker markets in Europe. They were put up for sale last year as they were unable to make cost savings since the merger. They have recently accepted a cash and stock offer from poker firm, 888 who is also an online casino.
Their acceptance of the 900 million pounds rejects an offer from GVC and Canada's Amaya Inc. of 908 million pounds. Their reasoning was they felt GVC and Amaya were too complex and did not show good growth prospects. GVC has now come back with an increased bid of $1.55 billion. The 888 firm is not commenting on whether or not they will come back with a new bid.
This increased bid seems to leave Bwin with little choice other than to accept it over 888's offer. GVC plans to finance this deal with a combination of new shares and a $443 million loan from a private equity firm. This combination will remove Amaya from the deal which had been causing Bwin most of it concerns regarding complexity.
Some of the shareholders at Bwin are eager for GVC to resume talks as they plan to fund reconstructing costs at Bwin.party and refinance some it's existing debt. If the offer from GVC were 135p-140p price, it would increase the comfort of more shareholders. The 122p price still holds a lot of uncertainty for many of them. Onus is on board to try and convince GVC's bid higher and to encourage 888 to reenter a higher bid.
The offer presented by GVC is 18 percent higher than 888's offer and it is said the offer will lead to cost benefits worth more than $150 million a year by the end of 2017. This savings is more than double the expected growth by 888's at only $70 million a year. One of Bwin's top executives; however is not satisfied with those numbers from GVC and would still prefer to go with 888's offer.
Bwin's shares did increase 2.4% while GVC's decreased 1.6% during these negotiations.