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Ladbrokes and 888 in Merger Talks

By: Ryan Alders, Tuesday December 21st 2010
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The big news in the online gaming industry this year was the merger between PartyGaming and Bwin. From all accounts that merger process is moving smoothly. Just yesterday the Sunday Telegraph reported the news of another potential mega merger. The operators in this case are Ladbrokes and 888.

Ladbrokes offers all online gaming products. Its online casino is powered by Microgaming. 888 is the online casino specialist that also owns the software provider Dragonfish. According to the newspaper reports Ladbrokes has valued 888 at around £240 million and has made an offer of 70p a share. Both companies have also confirmed to the London Stock Exchange that they are in preliminary talks, but have added that there is no certainty that these would culminate in an agreement.

This is not the first time that the two companies are in merger talks. The talks were earlier initiated in 2006 but fell through because of the passage of the UIGEA in America, which momentarily crippled the online gaming market. 888 was at that time valued at almost double the present value. One of the impediments that may come about in the negotiations is that 888 does not have any non-prosecution agreement with the US Department of Justice (DoJ) for its activities in America prior to UIGEA. PartyGaming has to settle with DoJ before its merger with Bwin could go through.

In May 2010, 888 posted a profit warning, leading to a 13% fall in its share price. Since then the online gaming industry has been speculating as to when a bid will be made for its stock and by whom. In fact in August 2010, Gigi Levy, the Chief Executive Officer of 888, had said in an interview that the company would be discussing a merger with other online gaming operators. Ladbrokes was named as a possible partner then. Ladbrokes head of Public Relations Ciaran O'Brien, however, has stressed that it was too early to speculate on a fruitful conclusions of the talks with 888 at this stage. He also said that Ladbroke's objective of doubling the share price within five years through improved performance was not dependent on this merger coming through.

The future of the online gaming industry has been discussed at several conferences and expos this year. The opinions expressed have been near unanimous. Keeping in mind the ongoing phase of national regulation of online gambling in Europe and the expectation that online gambling will become legal in America, the prediction has been that the market will be cornered by a few of the large operators and the smaller ones will have to sell out or close down. It seems that this prediction is on its way of coming true.

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