PartyGaming plc and bwin Interactive Entertainment AG owners of PartyPoker and Bwin Poker have confirmed their long anticipated merger. Bwin is set to take a 51.64 per cent holding in the newly expanded business. Talks have been taking place for the last few months and everyone throught the deal was off. However hot on the tails of the latest good news from the US with the approval of the Internet Gambling Regulation, Consumer Protection and Enforcement Act signalling a step closer to a regulated US Poker marketplace.
The merger expected to be completed in the first quarter of 2011 subject to various conditions from both sides including at least 75 per cent approval by both sets of shareholders.
Jim Ryan CEO of PartyGaming said "This is a transformational opportunity for both our companies to create the world's largest listed online gaming business, With market-leading positions in poker, sports betting, casino and games (in particular bingo), the Enlarged Group will have a winning formula to exploit the growing online gaming market, supported by a strong balance sheet, significant cashflow generation and a highly experienced management team."
Norbert Teufelberger, Co-Chief Executive Officer of bwin added: "This merger of equals makes great strategic, operational and financial sense. We will be in pole position to capitalise on the wealth of opportunities that will flow from the continued evolution and expansion of the global online gaming industry."
Both PartyGaming and bwin said that the proposed merger represents a transformational opportunity for both companies and their respective shareholders, creating the "world’s largest listed online gaming business" with estimated net gaming revenues of €682m and an EBITDA of €196m in 2009, before including any synergistic benefits as a result of the merger.
The combination of both businesses will create a well-balanced mix of revenues, with the geographic spread and product mix of PartyGaming and bwin highly complementary according to the companies, while the enlarged group will be well positioned to also further develop its B2B offering to international companies and governments.
PartyGaming and bwin believe that the enlarged group should be able to achieve gross pre-tax cost synergies of approximately €42m per year through the removal of duplicated costs, economies of scale in purchasing and cross-fertilisation of best-of-breed practices.
PartyGaming and bwin estimate that the realisation of these synergy benefits will be phased over a two year period following completion of the merger with substantially all synergies expected to be achieved in the first full financial year.
The proposed merger will be effected by bwin being merged into PartyGaming, with PartyGaming taking the form of a European Company or Societas Europaea (SE). On taking the form of an SE, PartyGaming will continue to be domiciled in Gibraltar where the central management and operational headquarters of the enlarged group will also be located.
The board of the enlarged group will be led by Jim Ryan and Norbert Teufelberger who will be co-chief executives, with Martin Weigold as group finance director and Joachim Baca as chief operating officer. A new independent non-executive chairman will also be expected to join the board of the enlarged group upon completion. Excluding the chairman, there will be equal executive and non-executive representation from the current PartyGaming and bwin boards. Current bwin co-CEO Manfred Bodner will become a non-executive director on the board of the enlarged group and will be involved in transition and integration management.
In consideration for their agreement to the proposed merger, bwin shareholders will receive new PartyGaming shares in accordance with the exchange ratio of approximately 12.23 new PartyGaming shares for each bwin share. On completion, the new PartyGaming shares will be admitted to the Official List of the UKLA and to trading on the London Stock Exchange's main market.
Based on the undiluted issued share capital yesterday, PartyGaming shareholders would hold approximately 48.4 per cent while bwin shareholders would hold approximately 51.6 per cent of the issued shares of the parent company of the enlarged group.
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