It's Official: PartyGaming Acquires Gamebookers

As anticipated, PartyGaming today announced its entrance into the sports betting market through the acquisition of European-facing sports book Gamebookers. PartyGaming will pay 102 million euro (US$130.6 million)--81 million euro ($103.7 million) initially and 21 million euro ($26.9 million) in 8 months--for Gamebookers, which is owned by private firm Trident Gaming and operated in Bulgaria with a license from Antigua. The acquisition enables PartyGaming to cross-market sports betting, and makes it more of a one-stop-shop gambling destination for customers located outside the United States.

Operating since 1999, Gamebookers provides sports betting in 12 languages to more than 250,000 registered customers in 140 countries. More than 53,000 of those customers are currently active. Gamebookers accepted more than 25 million sports wagers in 2005. The total amount wagered for the year amounted to 179.4 million euros ($229.7 million), which fostered a gross win of 10.1 million euros ($12.9 million) and an EBITDA of 4.6 million euro ($5.9 million). Gamebookers also operates a small but growing online casino and recently added a poker room.

The acquisition price of 102 million euro values Gamebookers at an enterprise value to core earnings rate of about 11-12 times.

PartyGaming forecasts Gamebookers to generate EBITDA of between 8 million euro ($10.2 million) and 9 million euro ($11.5 million) in 2006 without the benefits of cross-marketing. PartyGaming expects to experience earnings enhancements from cross-marketing during the current fiscal year.

"The acquisition of Gamebookers is an important step forward in diversifying PartyGaming's business from both a product and geographic perspective," Mitch Garber, CEO of PartyGaming, said. "Gamebookers is a well established and profitable operator with proven risk management skills and scaleable proprietary software. We believe that sports betting will be a valuable addition to our integrated betting platform, which we expect to provide excellent cross-selling opportunities for our expanding base of customers outside the U.S."

Gamebookers was sold to PartyGaming by parent company Trident Gaming, a private firm based in the Isle of Man, which picked up Gamebookers in July 2005 through a deal financed by over 9.3 million shares in Trident and £20 million ($37.7 million) of convertible debt. Trident is also the owner of Canada-based peer-to-peer sports betting exchange BetBug, which it claims to be the only legal online sports betting company in North America (legal because it uses software that connects bettors directly to one another rather than to an unlicensed gambling provider).

Jon O'Malia, CEO of Gamebookers, told eGaming Review, "The deal is a great credit to Mitch Garber. Our strategy at Gamebookers was always to look to be one of the winners in the sector, either through a flotation or through a strategic deal such as this."

An unnamed spokesperson for PartyGaming said that European customers will be able to access Gamebookers' sports betting offerings through PartyGaming's single-wallet solution, and that Gamebookers will likely be re-branded, perhaps with a name such as "PartyBet."

"The product offered to Party's customer base will be Party something," the spokesperson told eGaming Review.

About 80 percent of PartyGaming's customers are based in the United States, but the company will not offer its sports betting products to the American market because sports betting is generally considered to be a clear violation of the country's federal Wire Act. The legality of gaming and poker in the United States on the other hand remains a matter of much controversy because the Wire Act was written in the 1960s, when the emergence of the Internet and remote gaming was not imagined.

British newspaper The Guardian was first to reveal at the end of June that PartyGaming had secured around US$500 million through a bond issue and that the company intended to use the proceeds to acquire a series of online sports betting acquisitions. Several sources speculated that Gamebookers would be the first sports betting acquisition.

Market observers say the online gambling industry is--and will for many months remain--in a period of consolidation. As such, acquiring sports betting capabilities is an important step for an operator such as PartyGaming to take because it makes the company a one-stop-shop destination for online gambling and gives it the ability to cross-sell its range of products.

Online gambling shares suffered a beating last month following the arrest of BetonSports CEO David Carruthers and a resulting sense of fear in the investing community. I-gaming stocks collectively lost an estimated US$2 billion on the London market over the course of only a few days following Carruthers' arrest, and Garber has indicated that PartyGaming could take advantage of undervalued share prices by making even more acquisitions.

Garber also stated last week over a conference call discussing PartyGaming's latest trading results that the company is looking to expand in Asia and is working on a number of "very advanced initiatives" in Europe and South America.

Another part of the company's expansion plans includes growing its PartyCasino.com business. PartyCasino.com now offers 39 proprietary games, and despite a minimal amount of marketing support, attracts an average of over 23,000 real-money players per day. The company reportedly intends to begin advertising PartyCasino.com in both the United States and Europe in the near future.