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Will Amaya & GVC win bwin.party’s hand in marriage or will it be 888?

20th May 2015 7:04 am GMT
After all the trials and tribulations of the past few years, the falling revenues and declining profit, the strategy u-turns, the departing players and the redundant managers, who would have thought that bwin.party would be the subject of a bidding war?It was only in June last year, when bwin.party denied it was planning to sell. Just two months later chief executive Norbert Teufelberger accepted the inevitable and put the company up for sale. What had changed in such a short period of time? Amaya had bought PokerStars.Amaya has been linked with a move on PokerStars’ once-close rival ever since. The speculation seemed to be based on little more than the supposition that Amaya is acquisitive and seemingly able to tap its investors for unlimited funds as and when it pleases. Well, the supposition has proved to be prescient indeed. When the speculation linking Amaya to a bwin.party acquisition first emerged, an Amaya executive intimated that a bid might be too much for a company that was still trying to digest PokerStars and Full Tilt. However, he went on to outline the attractions of such a deal. For a start it might be relatively cheap. It would be a revenue-generating opportunity. As Amaya moves into new verticals (casino and sportsbook), it could quickly add market share. Amaya could release staff. He believed the PokerStars infrastructure and team could run the bwin.party business more efficiently than anyone. But… “David Baazov does not like doing those deals,” he said. “He sees himself as a job creator.” Well, now Baazov has found someone to do the dirty work for him in the shape of GVC chief executive Kenny Alexander. The Scotsman has no qualms about streamlining organisations and does so very effectively.When Sportingbet withdrew from the US market in 2006, Alexander was running its European operations. When management were forced to switch their attention from America to Europe, he was left out of a job. Since GVC acquired Sportingbet two years ago, Alexander has cut costs so effectively, he clearly feels he can do the same again with an even bigger beast. It would seem that Baazov believes he can too. The GVC-Amaya bid apparently consists of €1.5bn in cash and newly issued GVC shares. The poker business would immediately be sold to Amaya (presumably for not very much, even if it does give them another avenue into the US). Alexander will then run the rest of the company as a special purpose vehicle jointly-owned by Amaya and GVC. He will chop the company into shape for a future sale to Amaya, GVC or AN Other. However, the expectation is that Amaya will take the regulated bits and GVC the unregulated bits, just as it did when it split Sportingbet with William Hill. You have to admit, the deal has a certain dash of genius about it. Alexander and Baazov are really excelling at this consolidation business. They have a shared knack of creating very complex transactions that somehow manage to be simultaneously sublime in the simplicity of the overarching strategy. They also have the backing of investors, who probably can’t believe their luck at the riches that Baazov and Alexander keep funneling their way. The same could not always be said for their rivals over at 888. There was significant consternation at the way talks with William Hill floundered earlier this year. The disappointment stemmed from management’s belief that it should be an active player in the very obvious consolidation of the market. There was a real appetite for the deal but investors felt the price just was not right. Yes, there was disagreement and some shareholders were more hardline than others but it was certainly felt that Hills undervalued the business. “When they looked at the company, their only parameter was based on numbers in an Excel spreadsheet,” said an 888 source later. “You cannot run a strategic acquisition through Excel. There is a premium to what we offer above and beyond our EBITDA.” However, after fending off both Ladbrokes and William Hill in recent years, 888 looks increasingly unlikely to be bought. If it is to take part in any market consolidation, it will probably have to do so as an acquirer. It showed considerable balls in making its bid for bwin.party and it was only too happy to point out that all major shareholders were on board. It would be understandable if there was some despondency at Amaya’s intervention but perhaps Messrs Mattingley and Frieberger should not be feeling so down. bwin.party’s shareholders will have to make a choice between bids that will partially reward them with profit from future operations. Who should they trust with the future of their company to ensure the best return to themselves? Well it’s not just William Hill that has access to figures. We did some number-crunching of our own to see how the three bidders have rewarded their shareholders in recent years. Since GVC resumed trading after agreeing to buy Sportingbet in January 2013 its shares have risen 70.9 per cent from 270.00 pence a share to 461.50 pence. Amaya’s share price is up 128 per cent from CAD$14.17 to CAD$32.32 since it announced the acquisition of Rational Group on June 13th 2014. On April 11th 2011, 888 announced that chief executive Gigi Levy was stepping down. Brian Mattingley and Itai Frieberger took over and have overseen a resurgence that has resulted in its share price rising a remarkable 290 per cent from 43.50 pence to 167.00 pence. 888’s astounding growth has come over a longer period but the restructurings have been similar in impact. The others have done this before. 888 are second favourites. Few would bet against Baazov (let alone Baazov in partnership with Alexander). But does Teufelberger want to see his creation torn apart by Alexander or built upon by Mattingley and Frieberger? He and his fellow shareholders have some serious mulling ahead.sah@gamingintelligence.com
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