PartyGaming abandons £200m Gamesys bid, Financial Times

PartyGaming is understood to have pulled out of a proposed £200m takeover of Gamesys, a smaller UK rival, because of the impact of the US bill tightening the laws against online gambling.
People close to the discussions said a deal was within touching distance when the industry was taken by surprise by the US Congress banning US gamblers from using credit cards, cheques and electronic fund transfers to make online wagers.
Gamesys would have provided PartyGaming with its first online bingo operation.
Founded five years ago, Gamesys provides the games services for Channel 4’s Big Brother website and ITV’s Coronation Street bingo game.
But the all-cash deal, understood to be between £180m and £200m, was scuppered by the US law change, forcing Party-Gaming to say it would withdraw from the US and triggering a fall in its market value by more than 60 per cent this week.
Shares in PartyGaming closed down ½p at 40¼p yesterday. They closed last Friday at 107p.
The company has a $500m (£265m) rolling credit facility but must renegotiate terms with its banks because of a clause in the loan covenant requiring a reassessment of the facility in the event of a new anti-gambling law in the US that has a material adverse impact on trading there.
Gamesys declined to comment. PartyGaming said: “Mergers and acquisitions are still very much part of our strategy.”
Meanwhile, Pokerstars is understood to be reviewing its strategic options with advisers Dresdner Kleinwort and HSBC after putting on hold its plans for flotation.
A person close to the company said: “There is going to be a land grab in Europe. When the dust settles, we will know who is going to drive consolidation.”
Industry analysts said they expected the first wave of consolidation to take place among the larger companies seeking to achieve cost savings that have been made imperative by the blow to revenues from the US crackdown.
Playtech, the online gaming software company, said it was throwing its resources into the Asian market for online versions of popular regional gambling games such as Mahjong.
888 Holdings said it, too, was turning to Asia but was mindful of the legal and regulatory obstacles.
“China has had a crackdown on internet use as a whole and the authorities have seen online gambling as part of that crackdown. But we in the industry are talking to the Chinese government to try and strike a deal with them,” the company said.
888 said it would proceed with its planned dividend and special dividend pay-outs.

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