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HEADLINE: PartyGaming in talks to buy Empire gambling sites

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Internet gambling group PartyGaming is in advanced talks to buy the gaming assets of smaller rival Empire Online in a deal industry sources valued at around $40 million (20.4 million pounds).

Sector leader PartyGaming said on Thursday it was in talks to buy part of Empire, which confirmed it was selling gaming assets to become an investment company.

The group once towered over rivals with a market capitalisation of nearly 5 billion pounds, but when the United States banned online gambling in November it lost over three quarters of its value and began seeking ways to recover mass.

Another source said that after any deal was concluded, PartyGaming could strike a software licensing deal with Playtech, which already powers Empire’s sites.

It would be Playtech’s first deal with PartyGaming.

PartyGaming shares gained 2.5 percent to 30-1/2 pence by 12:45 p.m. on Thursday, while Empire’s shares rose by as much as 7 percent, but were later down by 2.3 percent at 43 pence.

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The two companies have previously been partners, but suffered an acrimonious split last year when PartyGaming ring-fenced its own poker players from those of four affiliates including Empire, which relied on PartyGaming software.

The split hit Empire hard, knocking 10 percent off its profits, and causing it to sue PartyGaming last December.

That dispute was settled in February when PartyGaming bought assets including Empire’s damaged EmpirePoker business for $250 million.

Empire’s Internet casino generated revenues of $30.2 million in the first half of 2006, while its poker site generated $8 million, but like most of its peers it has since quit the world’s most lucrative gaming market, the United States.

PartyGaming is planning to take on board some of Empire’s marketing experts who have helped it stand out against bigger rivals in the past, sources said.

Empire has been seeking to distance itself from online gaming since September.

On Thursday, Empire said, "Following any such disposal, the company’s intention is to become an investing company."

"The proceeds of any disposal would be used together with the company’s existing cash of approximately $250 million to invest opportunistically in both private and public businesses and across the small, mid and large-cap range of companies," it added.

A PartyGaming spokesman vehemently denied Internet reports the group was planning to re-enter the U.S. Internet gambling market.

Playtech was unavailable to comment.

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