888 Set to Win bwin.party Tussle

Even with a lower offer than rival GVC Holdings, 888 Holdings last week achieved the agreement of the board of director of bwin.party entertainment to buy the once-dominant iGaming company for $1.4 billion. The difference was apparently more certainty.

The battle to acquire the once-dominant iGaming company, bwin.party entertainment could be over. Last week, 888 Holdings submitted a last ditch effort to acquire bwin. The company bid ?898 million (about .4 billion) in cash and shares. The company’s board of directors immediately recommended this bid over one made two weeks ago by GVC Holdings and Amaya of ?900 million.

888 in May confirmed that it had bid for bwin, but GVC emerged as the frontrunner after making its bid, and bwin.party responded positively to the GVC bid, saying that it would work with the company to establish a final offer.

The difference between the two bids was reportedly the certainty offered by the 888 bid. The GVC bid apparently contained several risk factors and was tied to operational targets. The deal with 888 would also produce cost-savings that may not have occurred in the GVC deal.

“The obvious question is why the bwin.party board is willing to accept the slightly lower offer from 888,” David Jennings, an analyst at Davy Research, said in a note. “We think it reflects a preference on the part of bwin.party management to receive equity in 888 Holdings rather than GVC.”

The market value of 888 is more than double that of GVC at  ?615 million. 888 shares jumped almost 8 percent following the announcement of the deal.

“The deal is strategically compelling for 888 and they look to have secured bwin.party for a reasonable price and efficient structure,” Nick Batram, an analyst at Peel Hunt in London, said in a note to investors. “There would appear to be room for GVC to come back, but 888 now looks firm favorite.”

The company said a bwin purchase would result in a “significantly enhanced scale” for 888 allowing it to take advantage of market growth and create more efficiency in marketing. In addition, the company is considering spinning off bwin’s B2B business.

“The acquisition is likely to be significantly value- accretive for shareholders,” wrote Karl Burns, an analyst at Panmure Gordon in London. “The combined group is likely to be highly cash-generative, potentially allowing for future shareholder returns.”

If the deal is completed, bwin.party shareholders will own about 49 percent of the entire company.