PCGE readies London IPO to fund China online poker and lottery launch

Shares in PCG Entertainment (PCGE) will be admitted to trading on London’s Alternative Investment Market later this week as the company seeks approval from the Chinese government to hold online poker tournaments and create national lottery products across the People’s Republic of China.

PCGE is a Gibraltar incorporated holding company which holds four licences relating to the operation of online poker and lottery games based in China. It owns these licences through a wholly foreign owned enterprise structure and variable interest entity arrangements over a Chinese subsidiary Sihai Geju.

PCGE raised £3.4m through a placing of 1,030,691,444 new ordinary shares last month, which valued the company at approximately £61.8m. The shares are expected to be admitted to London’s AIM market on Thursday, December 4th.

Initially, the company intends to seek governmental and local authority approval in China to utilise the licences in partnership with two Hainanese firms, Hainan Huan'ao Culture Media (HPC) and Hainan Huan'ao Sports Industry (HLC), to hold online poker tournaments and create national lottery products including lottery games.

HPC operates poker tournaments in the Hainan province, while HLC is licensed by the Hainan Sports Lottery Management Centre to be a sales agent for sports lottery products through its retail outlet in Haikou and also runs virtual sports lottery games.

PCGE said also that it intends to exploit the licences to expand its business into premium rate telephony, virtual currencies and the distribution of games and other media through the internet and other channels. This may include broadcast, print and mobile and other areas where the company’s directors believe that there are opportunities to grow shareholder value.

PCGE has an option to acquire a 10 per cent stake in both HLC and HPC, which the company intends to exercise immediately prior to admission. This will see a further 31,456,433 additional shares issued, which is expected to be admitted to trading on AIM on December 9th.

Sihai Geju holds the licences relating to the internet operation of online games and, via cooperation agreements which will become effective once the option is exercised, has arrangements in place to roll out its business strategy in partnership with HPC and HLC.

Following completion of the acquisition, PCGE will be entitled to receive its pro rata proportion of dividends payable by HPC and HLC and subject to the obtaining of all licences and permits, a percentage of any gross revenue generated from the online poker game business.

According to PCGE, its directors have years of business experience in the areas of acquisitions, accounting and corporate and financial management as well as experience of media, gaming and marketing in Europe, the Middle East and the Asia Pacific regions.

“Accordingly, the board believes that it is well placed to leverage the Licences and this experience to achieve its goal of becoming one of the top online gaming companies in the PRC,” said the company.

Its board of directors includes chairman Kung Min Lin (who will own 14.6 per cent of the company’s enlarged share capital), deputy chairman Richard Poulden (who will own 13.3 per cent), CEO Nicholas Bryant, chief financial officer Clive Hyman, and non-executive directors Michael Mainelli and Alan Gravett.