bwin.party digital entertainment and 888 Holdings have reached agreement on a 104.09 pence per share bid by 888 to acquire the entire share capital of bwin.party.

The agreement sees 888 win out over rival GVC in its bid to acquire bwin.party, despite offering a lower price than GVC's 110 pence per share bid.

The acquisition will be made through a new wholly-owned subsidiary of 888 Holdings, 888 Acquisitions, and comprises 39.45 pence in cash and 0.404 New 888 Shares.

The board of directors of the two companies said that the offer represents a transformational opportunity for both 888 and bwin.party and offers the potential to enhance shareholder value.

They said the combined business would benefit from enhanced scale, product offering and significant cost and revenue synergies, with cost synergies expected to amount to US$70m annually by the end of 2018.

888 executive chairman Brian Mattingley commented: "This is a transformational opportunity for 888 in the consolidating online gaming industry, which is expected to grow significantly over the coming years. The Enlarged Group will benefit from significantly enhanced scale, an improved product offering as well as significant cost and revenue synergies. It delivers a substantial premium to bwin.party Shareholders whilst also giving them the opportunity to participate in this value creation opportunity. 888's management have a well-established track record of delivering outperformance since 2011 and we look forward to working with our new colleagues to create a global leader."

bwin. party chairman Philip Yea said: "A year ago we set out to explore industry consolidation opportunities whilst working to improve our core business. We have made substantial progress on both counts and our announcement today marks the first step in a new phase in our short history.

"Bringing our two groups together will generate substantial financial synergies for the benefit of both sets of shareholders and create a strong player with the breadth of product, brands and geographic coverage to grow faster than either business would be able to achieve stand-alone. Drawing upon a wealth of experience accumulated over the past few years, our management team looks forward to working with new colleagues to realise the considerable potential that this business combination presents."

Following completion of the offer, bwin.party shareholders will own approximately 48.9 per cent of the issued ordinary share capital of the enlarged group.

Pro forma combined annual revenues for the enlarged group would amount to approximately US$1.1bn for 2014.

With regard to the 110 pence per share offer from GVC Holdings, the board of bwin.party said that while the proposal offered many attractive features and a modest premium to 888’s offer, it also carried additional execution risks.

"The bwin.party directors have concluded, after further work with GVC and its advisers and after careful consideration, that 888’s offer provides a higher degree of certainty for bwin.party shareholders and that GVC’s modest incremental premium to 888’s offer is not sufficient for the bwin.party board to recommend GVC’s proposal over 888’s offer," the company said.

Following completion, it has been proposed that bwin.party independent non-executive director Liz Catchpole and chief financial officer Martin Weigold will join the 888 board as an independent non-executive director and a non-executive director, respectively.

In addition, bwin.party CEO Norbert Teufelberger will provide consultancy services as and when required by the 888 board with regard to the enlarged group's sports betting offering.

Shares in 888 Holdings plc (Co. Data) (LSE:888) were trading up 2.03 per cent at 163.25 pence per share in London early Friday morning, while shares in bwin.party digital entertainment plc (Co. Data) (LSE:BPTY) fell 1.05 per cent to 101.82 pence per share.

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