Online gaming firm 888 Holdings (LSE: 888) today announced that it submitted a proposal to take over Bwin.Party Digital Entertainment (LSE: BPTY) for a consideration comprising cash and 888 shares.
888’s move confirms that Bwin.Party shapes up as an attractive target in the sector, coming hard on the heels of a similar takeover offer delivered Friday 15 May by another sector peer, GVC Holdings (LSE: GVC).
In play
Needless to say, Bwin.Party shares soared on the news of all this interest in the company, and perhaps on the smell of it in the air before hand, rising around 27% since the beginning of May.
888 Holdings and GVC Holdings see Bwin.Party as a good fit to their existing operations, and both potential acquirers saw their shares buoyant through the first half of May too, suggesting that investors view sector consolidation as desirable.
A good fit Bwin.Party may be, but the approaches of both 888 and GVC strike me as ambitious. This is how the firms compare:
|
Index/market |
Recent share price |
Market cap. |
Revenue to 31/12/14 |
|
|
Bwin. Party |
Ftse 250 |
108p |
£820 m |
$612 m |
|
888 |
Ftse Small Cap |
164p |
£605 m |
$455 m |
|
GVC |
AIM |
461p |
£281 m |
$225 m |
Bwin.Party is the largest firm on most measures and therefore represents a big mouthful for its suitors to chew. The firm resides in the ‘grown up’ FTSE 250 index and outsizes its rivals in terms of market capitalisation and turnover.
Based on the numbers it’s easy to imagine Bwin.Party swinging its weight and pitching for its rivals, not the other way around as we are seeing. Indeed, GVC states that if its proposed offer were to complete, it would constitute a reverse takeover due to the size of Bwin.Party relative to GVC. Indeed, GVC is roughly a third the size of Bwin.Party.
What next?
Consolidation in a sector can make sense, particularly in areas as volatile and cyclical as online gaming. In theory, it seems attractive to eliminate competition, gain market share and cut costs through acquisition. It’s also easy to see the appeal for a relative minnow such as GVC to leap frog into the bigger FTSE 250 league in one transaction.
However, as with all early-stage takeover pitches, there can be no certainty that either bid will succeed. We’ll just have to wait and see what eventually happens, if anything. It’s even possible that these early overtures could presage further manoeuvring with Bwin.Party in the driving seat.
