PartyGaming-U.S. Settlement 'Several Months Off,' Brokerage Says

PartyGaming's mercurial shares fell nearly 8 percent in Tuesday trading as one brokerage said a settlement with the United States Department of Justice is "still several months off."

In a research note, Richard Carter, an analyst at Numis Securities in London, said that talk of an imminent settlement is "premature."

Mr. Carter said that while PartyGaming was unwilling to provide a specific number, he projects the settlement could total between $24 million and $150 million.

"Even if we were to assume our worst case DOJ fine assumption of $150m we still think the PartyGaming investment thesis is compelling, as we believe that post a DOJ settlement the group valuation would materially rise as a key unknown is removed," he said.

Mr. Carter suggests moreover that should PartyGaming successfully resolve its United States legacy issues, its shareholder base would widen "dramatically."

The company could then "tap debt markets and borrow up to 2.5x EBITDA, or $409m, for acquisitions," he said.

For reference, in December 2007, Microsoft ($21 million), Yahoo ($7.5 million), and Google ($3 million), settled for a combined $31.5 million with the Justice Department.

And in July 2007, Neteller agreed to a $136 million settlement, the last payment of which -- $38.5 million -- was sent in January.

Meanwhile, Mr. Carter has a "buy" recommendation on PartyGaming's shares, which closed down 22.50 pence, or 44 cents, to 277.50 pence.

Mr. Carter declined further comment when contacted by Interactive Gaming News.

Calls to PartyGaming were not returned.