Ladbrokes confirms early talks on 888 acquisition

Ladbrokes, the UK's leading gaming group late Sunday night confirmed that it is in talks to acquire an online poker and casino group, 888 Holdings. Online gaming firms are in crises since the U.S. Congress passed legislation to end Internet gaming last month, forcing the gaming industry to merge.

Chief executives of Ladbrokes and 888, Christopher Bell and John Anderson, respectively, were thought to be flown to Tel Aviv, Israel this weekend to discuss an acquisition deal with 888's majority shareholders, Avi and Aharon Shaked. The Israel-based brothers have 51 percent stake in London-listed 888 and are the founder of the gaming firm.

“The Board of Ladbrokes notes the speculation in the weekend press and the company can confirm that it is in the early stages of reviewing a possible transaction involving 888. No decision has been made as to whether any proposal will be made to 888,” the Harrow, England-based Ladbrokes said in a brief statement.

Ladbrokes reportedly will offer $894 million for Gibraltar-based 888. If the deal between 888 and Ladbrokes gets go-ahead then it will be a severe blow to PartyGaming, which is desperate to do a deal with the former group.

Media reports have been stating for the last two weeks that 888 is in merger talks with PartyGaming , but sources close to the situation told on Saturday that PartyGaming is losing interest in a potential deal.

If the deal matures, it could mean that the Israeli brothers, who are keen to stay invested in the sector, will become the largest private investors in Ladbrokes, which is valued at about £2.5bn. Furthermore, experts assert Ladbrokes is in a far stronger position for a bid than PartyGaming. Ladbrokes is apparently willing to offer a mix of cash and shares for 888, while PartyGaming is in no position to make a share offer. Its shares have collapsed to just 27½p from a year high of 158p.

Ladbrokes has a market value of 2.57 billion pounds, and its stock has jumped 4.8 percent this year. On the other hand, 888 Holdings has a market value of 372.5 million pounds and its shares have dropped 42 percent this year.

Share price of 888 on Friday closed at 110½p. According to a leading gaming analyst, amid the bidding war, 888's share price could be grown up to 160p, placing the company’s market value at £540m.

As both firms are located in the same building in Gibraltar a merger could slash head office and staff costs by £9m.

Meanwhile, Gibraltar-based PartyGaming, one of the world's largest online gaming groups, is in talks to buy part of Austrian Internet betting company bwin.com, a source close to the situation on Saturday disclosed. Besides bwin.com, PartyGaming is also seeking other deals, including smaller online bingo and casino operators, the source added.