Empire Limbo: How Low Can You Go?

PartyGaming has followed its decision to segregate the players of its skins clients from the main PartyPoker network with what now appears to have been its plan all along. The company has essentially absorbed two of the four skins into the PartyPoker network and completely severed ties with another. It has been in negotiations with the owner of the remaining skin, EmpirePoker, since the beginning of the month.

PartyGaming has agreed to pay Multipoker US$14.5 million in cash to acquire its business, which includes the Multipoker brand and the Multipoker.com Web site as well all other assets, intellectual property and its database of 255,000 predominantly Scandinavian players. Multipoker's players are expected to return to the massive PartyPoker network.

A deal reached with another skin, IntertopsPoker.com, will probably also result in the return of the skin's players to the main network. Rather than acquiring the whole of the IntertopsPoker business as it did with Multipoker, PartyGaming has made IntertopsPoker an affiliate of PartyPoker.com and acquired its player database. PartyGaming says the agreement will enable PartyPoker to market its services to IntertopsPoker.com players and gives PartyGaming control of the IntertopsPoker.com site for the next 15 month.

Meanwhile, British betting group Coral Eurobet has opted for a longer-term strategy for its poker business by ending its relationship with PartyGaming. In the next few weeks Coral will migrate its players to a different online poker network, which numerous sources are reporting to be that of Ongame.

What remains to be seen is the impact the breaking up of the skins network will have on EmpirePoker's sale price. Players from EmpirePoker and the other skins were removed from the PartyPoker platform one month ago, and Empire Online confirmed the following week that the move would probably result in a 10 percent decline in its net profit for the year 2005.

PartyGaming revealed on Nov. 3 that it was in negotiations to acquire Empire Online, but stressed that the talks between the companies were only in preliminary stages; no offer values were disclosed. Shares of Empire Online reached an all-time high of 275p in September following Sportingbet's $1.4 billion bid to purchase the company, but by the time PartyGaming confirmed it was negotiating to purchase Empire, shares were hovering around 115p.

Analysts had speculated that PartyGaming's bid was probably about half of Sportingbet's bid, or about $708 million. In the time since then, however, Empire's share price has slipped even further, closing Tuesday at 89p. With the players from the three other skins disappearing, EmpirePoker players are all that remain on what was a small network to begin with. Some observers are speculating that Empire's value can only go down from here.

As Robin Chhabbra of Evolution Securities stated to the Guardian, "PartyGaming is using this to further squeeze down the price it pays for Empire--that's if it bothers at all. They're just deciding now if they're going to squeeze it and then buy it, or just kill it."