Game on for Bwin
By Connor Campbell
With Bwin.Party Digital Entertainment (BPTY) the belle of the takeover ball at the moment, it makes sense to investigate the company’s current standing, and whether or not it’s a gamble worth taking.
Currently the bidding war appears to be between 888 Holdings (888) and GVC Holdings (GVC), the latter being backed by Canadian company Amaya Gaming (who have already circled Bwin before back in November 2014). Whilst a deal may not even go through, it is worth evaluating what has made Bwin so attractive.
Since the initial announcement of GVC’s bid last week Bwin rose from £0.859 to £1.073 with a high of £1.1255 reached during Monday 18th May; however, since news quietened down the stock has fallen back to £1.075. Before this M&A rumour surge, 2015 had been a troubled year for Bwin. The news on a nightmarish Friday 13th back in February that the previous round of takeover speculation had hit a dead end saw the stock plummet 17.84% on the day to £0.843, at one point hitting a low of £0.778.
The stock then languished around this level for the rest of the year until the current takeover talk, with its full year results failing to cause much excitement as Bwin posted some troubling numbers. Issues with ISP blocking in Greece, alongside problems with the poker sector causing revenue in that area to decline by 29% to €87.1 million, led to Bwin’s revenue to fall by around €40 million year-on-year to €611.9 million, with only a slight bump from the 2014 World Cup for its sportsbook.
So what is it about Bwin that consistently makes it the focus of such speculation? With online gambling regulations in the US easing on a state by state basis, and with Europe seeing similar progress, the time is right for expansion into this area – an expansion, however, that comes with a hefty tax bill. It is because of this that Bwin.Party is so attractive. For all its troubles before the M&A fever set in, Bwin is the world’s largest publicly traded online gambling company, one that has plenty of juicy assets to be stripped, whipped or snipped if any of the takeover bids are successful, especially since the company claims it is the market leader in online sports betting, poker, casino and bingo.
In the sector as a whole this kind of thing is astonishingly regular since George W Bush introduced his Unlawful Internet Gambling Enforcement Act in 2006. For example, the intentions of the GVC/Amaya partnership look incredibly similar to those of GVC when it teamed up with William Hill (WMH) to break up Sportingbet and strip it for parts. Amaya itself bought PokerStars and Full Tilt Poker last year, whilst as mentioned the Canadian company had already approached Bwin in November, as did Playtech (PTEC). 888 meanwhile was the focus of failed takeover talks with William Hill back in February. It appears as if, since those gambling rules were introduced by Dubya, that expansion through rival removal has been the dominant way forth in a bid to offset a larger tax bill through minimizing costs by using the pre-established parts of other companies.
Yet what is also clear, as shown by the many failed takeover attempts in the past few years, is that in a betting world where the number of players is shrinking, these talks appear more and more difficult to make a reality. Bwin has already been stung in the past by the failure of such takeover speculation; given how its shares are gradually falling as each day passes with no news, it may have to brace itself for another plunge if history repeats itself in the next few weeks.
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