888 and Ladbrokes Call off Merger Talks
The talks that have been ongoing between two of the largest gaming, betting and online poker companies, 888 Holdings plc and Ladbrokes plc, about a possible merger of operations, have been discontinued.
Both of the companies are listed on the London Stock Exchange which meant that any information likely to affect the share price, such as progress on a merger of operations, had to be announced to shareholders as it arose. The initial merger talks were therefore first announced way back on 30th October 2006 by 888 Holdings plc. This development occurred in the aftermath of the controversial US online funding law changes brought about by the Safe Ports Act and its appended legislation, the "Unlawful Internet Gambling Enforcement Act of 2006" (UIGEA).
Since then, when the seismic waves caused by these changes were upsetting the budgets of every large online gaming company, there have been periodic announcements by Ladbrokes and 888 along the lines of "talks are continuing".
However, there had been speculation that the heavy US involvement by 888 in its past – 888 Poker and Casino-On-Net each boasted huge US customer bases before they were cut adrift after the passing of UIGEA – caused Ladbrokes some disquiet as it raised the question of amalgamating the two structures and perhaps cultures. In contrast, Ladbrokes had never allowed US citizens to open accounts. Ladbrokes is historically a sportsbetting group so it had always shied away from the US due to sportsbetting having long been targeted by US anti-gaming laws.
This agreement not to continue discussions may well signal an element of "panic now over" so far as the online gaming sector is concerned. The share prices of US-hit Party Gaming and 888 Holdings have for some time been recovering from some dramatic collapses.
That said, today's news has dented 888 Holdings' share price by 6% as the potential merger was seen by the market as akin to a takeover of 888 by Ladbrokes. With the "bid" premium gone, 888 is left to fend for itself again. Being the one that lost much US business last October, the market sees it as being the one with most to prove. Meanwhile, Ladbrokes can sail on serenely in European waters. The stock market marked up Ladbrokes' share price a little on the news.
The text of the statements from the two companies was as follows:
888 Holdings plc
Further to the announcement made by 888 on 30th October 2006 and by Ladbrokes plc on 6th November 2006 concerning discussions regarding a possible transaction, the Board of 888 announces that the parties have amicably agreed to discontinue talks.
The outlook for 888 remains unchanged since the trading update and Q4 Key Performance Indicators announced on 14th February 2007. The Board remains confident of the prospects of the Group and the release of preliminary results for the period ending 31st December 2006 will be issued on 30th April 2007.
On 6th November 2006, the Board of Ladbrokes plc announced that it was in the early stages of reviewing a possible transaction involving 888 Holdings plc.
Ladbrokes plc today announces that the parties have amicably agreed to discontinue talks.
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