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 888, which itself rejected a takeover by Britain's biggest bookmaker
William Hill in February, had been battling against a 908 million
pound offer from GVC Holdings for Bwin, which put itself up for sale
last year.
The recommended deal is the latest in a flurry of M&A activity in
the industry, a trend set to continue as firms expand to help offset
increasing taxes and tighter regulation and fund higher marketing
and technology spend.
"We believe the deal creates one of the world’s leading online
gaming operators," 888's Executive Chairman Brian Mattingley told
Reuters.
"It's all about scale... When you've got critical mass you can ride
storms and take advantage of opportunities as they come along," he
added.
888's offer of 104.09 pence per share, made up of 39.45p in cash and
0.404 new 888 shares, is 16.4 percent higher than Bwin.party's share
price of 89.40p before talks began on May 14.
While lower than the 110p face value of GVC's rival offer,
Bwin.party said it carried fewer risks, with better prospects and an
experienced management team all factors.
Shares in 888 were up 6.8 percent by 0845 GMT. Bwin.party, up 30
percent in three months, fell 0.4 percent.
"We upgrade 888 from 'Sell' to 'Hold' following today’s acquisition,
given the potential for significant synergies, whilst the combined
group is likely to be highly cash generative potentially allowing
for future shareholder returns," Panmure Gordon analysts said.
COST SAVINGS
888, which offers casino, poker and bingo games, has enjoyed strong
growth as gamblers move online via tablets and mobiles. In acquiring
Bwin.party, the firm will significantly boost revenues from its
fledgling sports betting business, and can apply its stronger
technology platform and management to Bwin.party's business.
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The two companies said the deal, which would be earnings enhancing
in its first full-year, would lead to cost benefits of at least $70
million per annum by the end of 2018 by removing duplicated costs,
technology and administration fees.
888 currently has a market capitalization of 572 million pounds
versus 848 million for Bwin.party, which has struggled with the
decline of regulated poker markets in Europe and to make cost
savings since its creation via a merger of sports betting group bwin
and online poker group PartyGaming in 2011.
Bwin.party had faced pressure from U.S. activist investor Jason
Ader's Spring Owl vehicle, its second biggest shareholder.
Mattingley said 888 had a "very good" relationship with Ader.
A combined group will have revenue of over $1 billion and be a
leading online gambling operator in Belgium, Denmark, Germany,
Italy, Spain and the UK. Bwin shareholders, who will be able to vary
the amount they receive in cash and new 888 shares under a "mix and
match" facility, will own 48.9 percent of the new firm.
The two companies said they would also considering spinning-off
Bwin.party's 'Studio's technology business.
(Additional reporting by Mamidipudi Soumithri in Bengaluru; Editing
by Anupama Dwivedi and Keith Weir)
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