Sportingbet Bids for Empire Online

Analysts have been predicting that a period of consolidation is just around the corner for the online gambling industry, and Sportingbet plc has stepped up in the roll of buyer by bidding to acquire Empire Online for £791 million.

Empire said Friday that it received an offer of 270p per share in a mixture of cash and equity from an unnamed suitor, which was identified today as Sportingbet.

A successful merger with Empire would give Sportingbet control over a partner to one of its biggest rivals, PartyGaming.

While PartyGaming and competing providers have built massive Internet poker networks from scratch, Sportingbet has taken its share of the poker market by means of acquisition. The group last year purchased Paradise Poker, the fourth largest online poker room, in a cash transaction and hopes to return Paradise to its position as the Internet's No. 1 poker network--a roll currently held firmly by PartyGaming's PartyPoker network. Acquiring Empire could by a major step in accomplishing this, although a substantial gap separates Party, with its market cap of £6.27 billion, and the rest of the industry.

Chaired by Stanley Leisure founder Lord Steinberg, Empire floated in June '05 on the London Stock Exchange, where Sportingbet has traded for nearly five years. Shares in Empire on Friday closed up 9p, or 3.5 percent, at 264p, valuing the group at £772.9 million. Sportingbet, meanwhile, closed up 17p, or 4.8 percent, at 368p, giving it a market capitalization of £1.24 billion.

Empire markets and promotes online gambling entities and aids in player acquisition for PartyGaming. It operators EmpirePoker.com as well as an affiliate network. As of Friday, whether Empire's contract with PartyGaming was covered by change of control clauses was unclear.

PartyGaming is expected to make a counter bid if a Sportingbet/Empire merger is reached.

Regardless of the outcome, assuming a merger goes through, Empire's founder, Noam Lanir, stands to gain a substantial windfall. The Israeli entrepreneur founded Empire in 1997 and now holds a 21.4 percent stake (valued at £163.9 million at the close of trading Friday) in the business.

In the big picture, a Sportingbet/Empire merger could trigger the long talked about consolidation of the online gambling industry. 888.com, the world's largest online casino by number of visitors, last week confirmed plans for a £700 million initial public offering, which its chief executive, John Anderson, said would give it an "acquisition currency."

Empire Online also named Andrew Burns as chief financial officer, according to a separate statement released Friday.