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Copyright 2004 AFX News Limited
AFX.COM
October 28, 2004 Thursday
HEADLINE: Sportingbet stakes 196 mln stg on
Paradise Poker UPDATE
BODY:
(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.
sd/slm/
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