Britain's PartyGaming and Austria's bwin unveiled a deal on Thursday to create a $3.3-billion online gaming business, positioning them to profit from any deregulation of a lucrative US market.
The deal to create the world's biggest listed online gaming company could kickstart a flurry of M&A activity in a fragmented sector that is seen as ripe for consolidation because of opportunities created by the relaxation of gambling laws around the world.
Moves in the United States to overturn 2007 legislation that effectively outlawed the industry gained momentum on Wednesday when the House Financial Services Committee voted to approve a bill introduced by Committee Chairman Rep. Barney Frank which would legalise and regulate Internet gambling in the country.
"We're very excited about the U.S. opportunity," PartyGaming Chief Executive Jim Ryan told reporters on a conference call.
"It's tough to quantify it until we actually see the form of legislation, but there was a very positive step made by Mr Frank yesterday, and that's in addition to a number of positive steps that have occurred at a Federal and State level over the course of this year," he said.
Ryan added that both companies had been "working aggressively in preparing strategies and tactical plans to get ready for U.S. re-entry".
REVERSE TAKEOVER
Under the terms of the deal, classified as a reverse takeover of bwin by PartyGaming under UK rules, bwin shareholders will get 12.23 new PartyGaming Shares for each bwin share, giving them 51.6 percent of the new company.
The new group will be listed on the London Stock Exchange and jointly run by current chief executives of the two companies, Ryan and Norbert Teufelberger. Bwin shares will de-list in Vienna following completion of the merger.
Shares in PartyGaming surged as much as 30 percent, while bwin added as much as 28 percent, hitting their highest levels since March. PartyGaming was up 23.4 percent at 317 pence at 1202 GMT while bwin was up 22 percent at 43.15 euros.
Based on Wednesday's closing share prices, PartyGaming had a market value of 1.050 billion pounds ($1.64 billion), while bwin was worth 1.281 billion euros ($1.67 billion).
The companies said they already had support for the deal from shareholders owning 28.5 percent of PartyGaming and 14.4 percent of bwin.
"This is a transformational opportunity for both our companies to create the world's largest listed online gaming business," Ryan said in a statement.
"With market-leading positions in poker, sports betting, casino and games -- in particular bingo -- the enlarged group will have a winning formula to exploit the growing online gaming market."
PartyGaming said it had been advised on the deal by Deutsche Bank. - Reuters