Uniting Gamesters

BWIN’s on-going search to “create shareholder value” seems to be moving on with the announcement that it “has entered into preliminary discussions with a number of interested parties regarding a variety of potential business”. A previous post on a number of the main players in the European gambling sector highlighted that William Hill and Paddy Power were speculated to be potential bidders for all or parts of BWIN, a European online gaming firm with a concentration of approx 25% of revenues from Germany. Now press reports speculate the potential interested parties include the Canadian firm Amaya, who purchased PokerStars/Full Tilt earlier this year, and Playtech, a software gaming firm that are “seeking transformational M&A opportunities to take the business to the next level”.

Commentators raised an eyebrow about the speculated 45% premium on offer (from before discussions were reported) given BWIN’s operating metrics and the uncertainty over the key German market. Speculation involving Playtech focussed on their recent debt raising which brings their cash-pile to around €700 million. Playtech’s shareholders may not be too pleased if their new strategy moves too far away from the very profitable software business, particularly considering the alternative of continuing with their generous special dividends. Taking on businesses such as BWIN, or even another speculated target like Ladbrokes, is a far cry from what made Playtech such a star.

In fact, the best performer in the sector (in fact the only name that’s in positive territory!) is the reinvigorated Betfair under Breon Corcoran (see previous post on Betfair) as can be seen below (they also have cash to spend on potential M&A).

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This is a fascinated sector that is in the midst of considerable change. Although I have no financial interest in the sector, I am an intrigued bystander. Bring on the next development.