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Online gaming predators look to mirror PartyGaming

Internet gaming groups seek to diversify away from the United States and take advantage of low share prices.

india Updated: Aug 05, 2006 16:39 IST

PartyGaming's acquisition of Gamebookers could be the model for other deals this year in Europe as Internet gaming groups seek to diversify away from the United States and take advantage of low share prices in the sector.

About $2 billion was wiped off the value of London-listed gaming stocks in a few days last month, after the FBI moved to shut down the US operations of BETonSPORTS.

Shares in the sector, with sales of $12 billion a year, are also suffering the impact of legislation in Congress aimed at banning Internet gaming altogether.

But sector leader PartyGaming is still increasing revenues at around 50 per cent a year and about $1 billion is wagered on its PartyPoker website each week.

On Thursday, the group announced a move into online sports betting with the 102 million-euro ($130 million) purchase of Antigua-licensed and Bulgaria-operated Gamebookers.

"Valuations in the sector are attractive relative to underlying growth rates," said Investec analyst Matthew Gerard. "PartyGaming and 888 Holdings have been keen to move into non-US sports betting for some time."

One London banker said that uncertainty in the United States had put a hold on any deals that involved US business, but Europe was still considered safe.

"The US0 situation heightens demand to diversify away from there, and there are gaming deals being worked on right now in Europe, both online and offline," he said.

EUROPEAN DEALS SCARCE

As for Asia, Altium Securities analyst Wayne Brown said the market remained relatively immature and too fragmented.

"Europe is where it's at -- more deals will get done," he said, pointing to Leisure & Gaming's recent acquisition of BetShop Group as one example.

John Heaton, who was chief executive of Britain's state-owned bookmaker The Tote until 2004 and now holds the same post at Interactive Gaming Holdings, said: "I don't think Asia's a closed market, but you do need a local partner."

Heaton said that in the light of US moves to clamp down on online sports betting, companies with non-core sports betting operations might be reviewing whether they were worth holding onto.

Analysts also point to Sweden's Unibet, Austria's BETandWIN and privately-owned Expekt as attractive Europe-focused sports betting operations.

"But most of European online sports betting is tied up by the big three -- Sportingbet, William Hill and Ladbrokes," said one London analyst who declined to be named.

Gerard said PartyGaming's Gamebookers acquisition looked expensive at an enterprise value to core earnings of 12 times, reflecting the scarcity of European sports betting businesses.

But online gaming companies are not deterred.

888 Chief Executive John Anderson said last week he was actively seeking a sports betting operation to help keep customers on his gaming websites.

And PartyGaming appeared to suggest the Gamebookers acquisition would not be its last.

Chief Executive Mitch Garber last month said the group was working on a number of "very advanced initiatives" in Europe and South America.

"Going forward, you can expect to see us push harder into new territory, including Asia," a spokesman said on Thursday.