Bodog Entertainment Group SA ("Bodog"), the owner of the giant Bodog.com online poker room, has agreed to buy all of the gaming operations of the stricken Betcorp group for $9,000,000.
Betcorp has become a victim of the cold winds blowing through the US after the passing by Congress of the "Unlawful Internet Gambling Enforcement Act of 2006". Betcorp says that 85% of its revenues were sourced from the US and after a review it has concluded that it cannot support the rest of its business operations outside of the US by itself.
Betcorp's businesses include BetHoldem Poker, BetWWTS.com and Oasis sportsbooks, and the online casinos BetCasino, Lucky Lady and Thunderbolt, all of which were strong US-facing operations.
Under the terms of the deal, which is conditional only on the approval of Betcorp's shareholders, Betcorp will sell its gaming operations and operating infrastructure in Antigua and Toronto in their entirety to Bodog which has stated that it intends to invest in developing its own brand into the European and Asian markets utilising the multi-currency shared purse operating platform developed by Betcorp.
Betcorp will receive a maximum cash consideration of $9,000,000 payable in five instalments. $3,000,000 is payable on completion and the balance of $6,000,000 in four equal quarterly instalments during the 12 months following completion. In addition, Bodog will be assuming the net current liabilities of Betcorp of $2,000,000. There are some other factors which might adjust the final value of the deal but the overall sums are still relatively tiny compared to the value attributed to Betcorp six months ago by the stock market and will be of little comfort to shareholders.
Betcorp gave the following summary as its reasons for the disposal of its business:
"In the United States, the passing into law of the Unlawful Internet Gambling Enforcement Act on 13th October 2006, means that the receipt of funds from US residents by online entertainment companies located in any other country of the world in connection with internet gambling, has become a Federal offence.
"The Board received legal advice and representations from its lawyers, bankers and other advisors and concluded, in common with many other listed companies in the sector, that it is no longer possible for the Group to provide its services to United States residents. The two key issues which led to this conclusion are the possibility of the extra-jurisdictional application of United States legislation and the restrictions on financial transaction processing which are following from the Act. As a result, the Group suspended the accounts of United States residents on 13th October 2006.
"Over the last 18 months, the Group has made good progress in increasing the level of business from countries other than the United States, principally in Europe. This has been achieved by a number of initiatives including the introduction of European facing brands and the development of a proprietary multi-currency operating platform. Despite this progress, however, the US market still represented over 85% of the Group's revenues in the period from 3rd July 2006 to 13th October 2006.
"The Board has considered whether its non-US business could be profitable on the basis of a substantially reduced cost base, but has determined that this would not be possible without a major increase in trading volume. In the current environment, such expansion would require substantial investment in marketing and brand development, or the acquisition of existing non-US facing operators. The Group does not have access to the funds required to adopt either of these strategies and accordingly, the Board has concluded that it is in the best interests of shareholders to dispose of the Group's entire gaming operations and infrastructure."
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