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Online Poker News Archives - October 28, 2004

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Copyright 2004 AFX News Limited

October 28, 2004 Thursday

HEADLINE: Sportingbet stakes 196 mln stg on Paradise Poker UPDATE

   (Updating with further details of acquisition, comments from a conference call with the group)
      UK online gambling group Sportingbet PLC has agreed to buy Paradise Poker, the world's third biggest online poker business, for 196.3 mln stg in cash and shares.
     Sportingbet will pay 105.2 mln stg in cash and issue 56.68 mln new shares to Paradise Poker, which was set up just 5 years ago and is expected to deliver operating profits of 46.5 mln usd this year.
     Sportingbet said the main reason for the deal was to gain a foothold in the online poker industry, which has experienced meteoric rates of growth over the past few years.
    Industry turnover will be as much as 1.5 bln usd this year, compared to 0.4 bln usd last year, fuelled by the increasing popularity of televised poker tournaments. And looking ahead, Sportingbet expects the number of online poker players to continue expanding.
    "We have closely examined the industry and have found nothing to conclude that the significant growth that is going on in the market will not continue,"
said chief executive Nigel Payne on a conference call with reporters.
    "The primary reason for that confidence is that only a very small percentage of poker players are doing so on line. There is a great deal of growth to come."

    Another benefit of the deal would be to reduce Sportingbet's exposure to the risk of unfavourable sports results, according to Payne.
    60 pct of Sportingbet's income currently derives from sports betting, but after the acquisition of Paradise Poker, this will reduce to just 30 pct, with the remainder coming from the "risk-free environments" of its casino and poker sites, according to Payne.
    Paradide Poker earns its money from charging players entry fees to tournaments it organises and through 'rake', which is a small fee it takes from every cash game played on its site. Since all of its income is essentially commission-based, Paradise Poker itself runs no risk from unforeseen circumstances.
    Payne also highlighted the significant cross-selling opportunities of a combined customer base of some 2 mln punters.
    The takeover news came as Sportingbet announced results for the 16 months to the end of July, which showed turnover rising to 1.43 bln stg and pretax profits of 5.4 mln stg.
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