PartyGaming still in M&A talks - 4th March 2010
Online gambling group PartyGaming said it remained in talks over potential deal opportunities and was optimistic about a possible return to the U.S. as its 2009 earnings beat expectations.
"We are certainly in discussions with a few parties on a number of different opportunities," Chief Executive Jim Ryan told reporters on a conference call on Thursday.
However, he stressed that talks remained at a preliminary stage and declined to comment on the size or identity of the companies PartyGaming is talking to.
Analysts say the online gaming industry is fragmented and rife for consolidation and PartyGaming has been linked to a possible merger with Austria's bwin.
"There are a list of suspects who one would expect us to be talking to given that our focus is consolidating the online gaming sector," Ryan said.
PartyGaming said earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations fell to $135 million (90 million pounds) from $144.2 million the year before, reflecting a decline in poker revenues.
That was ahead of the consensus forecast of $133.3 million, according to a poll of analysts supplied by the company.
PartyGaming's poker revenues have been hit by competition from online gaming businesses which continue to offer services to U.S.-based players despite the industry being made illegal in that country in 2006.
Ryan said he was encouraged by recent moves in the U.S. to overturn the legislation. U.S. congressmen Barney Frank and Jim McDermott are attempting to push through a new bill to regulate the industry. They argue that, if it was introduced, it would generate tax revenues of about $42 billion over ten years.
PartyGaming has already reached agreement with U.S. authorities which will protect it from being prosecuted over its past activities there.
Ryan said the settlement will make it easier for PartyGaming to re-enter the U.S. market and also clears the way for it to engage in M&A activity.
"We are talking to a number of U.S. entities about doing business with them when the U.S. market regulates. It's positioned us for growth from an M&A perspective and, from an operational perspective, I think it's our ticket back into the United States."
Other operators such as 888 and Sportingbet have yet to reach a deal with the Department of Justice.
Ryan said he thinks the U.S. is moving closer to re-opening to online gaming companies.
"We're hearing rumours that we're going to get support from the land-based operators for online gaming so it seems like momentum is building," he said, adding it was "not impossible" new legislation could be introduced this year.
Shares in PartyGaming, which have risen by 17 percent in the last 3 months, were up 0.13 percent to 303.4 pence at 1106 GMT.
"PartyGaming is remarkably well prepared for a whole variety of changes. Although there is no new information on a possible game-changing acquisition, we believe it is more likely than not," said Numis analyst Wyn Ellis.
