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Kevin Smith

Sportingbet on the Block?

1 May 2003

Rumors are swirling about the future of after the company put out a required share-price announcement to the Alternative Investment Market of the London Stock Exchange.

In its notice to investors and analysts the company confirmed that it was in discussion with "a number of parties" with the goal of securing additional funding to meet its earn-out obligations due in September.

According to the release, discussions are ongoing with no decision being imminent. One such ongoing discussion, though, has been with a party entertaining the idea of making an offer for the "whole of the issued share capital of Sportingbet plc."

The London Stock Exchange requires that Sportingbet discloses this information because a potential suitor could offer a cheaper price for the stock than what it is currently trading at. The company's executive director, Mark Blandford, said no formal proposal relating to any possible offer has been received.

The company said any approach to take over its share capital would be conditional on due diligence, board recommendation and the support of significant shareholders.

"Accordingly it is uncertain whether these discussions will lead to an approach or an offer in due course," the statement said. "A further announcement will be made if and when appropriate."

After the statement was released Sportingbet shares dropped 6p to 30p.

The September deadline is in place from Sportingbet's acquisition in 2001 of, an offshore site that heavily targeted U.S. players for its customer base. As part of the deal, Sportingbet promised up to £103 million "earn-out" in cash and shares to the owners if profits hit certain targets.

Because Sportingbet's business has been going strong since the acquisition with exceptional performance rates the £103 million is due in September.

Past business has been great, which is good news to shareholders, but it also means that the money due will stretch the company's finances and create massive dilution of its stock.

Since the announcement, rumors have been rampant about what lies ahead for Sportingbet.

Nigel Payne, chief executive, told London's Financial Times on Wednesday that he couldn't confirm who the talks have been with, but he did say that rumors of a management buyout were false.

He said as part of the acquisition deal with, a cash liability to the original owners of about £20 million existed. Some analysts had predicted that figure would be higher, and Sportingbet's bank agreed to £20 million overdraft, but management was exploring other options for securing funding.

Another rumor regarding the company's future is a possible takeover bid by's founder. This could be a viable option considering the amount of cash they are owed would create a sizeable amount of holdings after the share proportion of the earn-out was taken into effect.

Sportingbet on the Block? is republished from
Kevin Smith
Kevin Smith