Amaya Backs Bid For Bwin.party

After rumors that Amaya is looking at acquiring the fantasy sports betting company DraftDay, there are more substantiated reports that the Canadian online gaming giant is backing the bid by the London based GVC Holdings Plc to acquire Bwin.party Digital Entertainment. The news item becomes more interesting because another London based online gambling firm, 888 Holdings, is putting in a rival bid.

There are several reasons for market leaders like Amaya and 888 Holding to acquire Bwin.party. Stricter regulations and rising development costs are forcing operators to aim for greater economies of scale. Bwin.party was itself a merger born from this reasoning in 2011. The jewel in Bwin.party’s crown is its proprietary sports betting operations, which made €237.1 million in revenues in 2014 of which 38% came from regulated markets. Nick Batram of Peel Hunt pointed out that owning a proprietary sportsbooks means savings of millions that otherwise go to third-party software providers. Things did not work out too well for Bwin.party after the merger. Bwin.party CEO Norbert Teufelberger has been considering a sale since November 2014. Batram warned that whoever ultimately acquires the ailing operator will face execution risks. But ever since the intent to acquire has been announced by the two bidders, the stock value of Bwin.party has been rising. There is no certainty that Bwin.party will accept either bid. 888 Holdings has made the offer without disclosing the value of the bid. According to Reuters, GVC's joint bid with Amaya would be valued at $1.69 billion and would consist of cash and GVC shares.

Analysts argue that a deal between 888 and Bwin.party is more likely to succeed because they share operations in places such as Gibraltar and Israel. The merged entity could cut at least €50 million in overheads by combining offices, development and licensing costs. If GVC succeeds then it is likely that GVC would own the majority of the shares. GVC would take charge of the casino, sportsbook and bingo operations. There is also talk of GVC selling the sportsbook to Amaya after two years. Amaya is likely to take immediate control of the online poker division, to complement its PokerStars and Full Tilt brands.

The news has been good for the Amaya stock holders. The stock closed at C$32.32 in Toronto Monday, valuing the company at C$4.3-billion. In fact shares in Amaya have jumped more than 3,000 per cent since selling for C$1 each in a July 2010 initial public offering.

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