Online gambling group Sportingbet is expected to make losses of more than GBP 300m in the current financial year after it is forced to write off a string of now almost worthless US acquisitions following a clampdown on unlicensed internet betting by American legislators.
The London-listed group yesterday announced it had sold Sportsbook.com, the largest online bookmaker in the world, for just GBP 1 (54p) to an unnamed private consortium only hours before President Bush signed into law a draconian anti-gambling act. The division’s management team will also acquire a stake.
Sportingbet’s Paradise Poker business, the third largest poker site in the US, yesterday closed to US customers with immediate effect – wiping out about two-thirds of divisional revenues at a stroke.
Meanwhile, the market leader in US online poker, PartyGaming – until this week a FTSE 100 company – last night issued a statement confirming that its websites had been closed to US customers. Fellow London-listed Empire Online made a similar announcement.
The prohibitionist Republican legislation, rushed through by senate majority leader Bill Frist as part of the Safe Port Act, is designed to target banks and payment services that facilitate online wagering. Its arrival has prompted an exodus from the US, with many London-listed firms joining the stampede.
Like PartyGaming and Sportingbet, London-listed 888 has declared its intention quit the US. Some industry insiders were last night speculating that these firms‘ customer databases – still valuable to those intending to ignore the act – could reach the black market.
The much smaller World Gaming, the company that hosts Sportingbet’s US-facing websites, yesterday became the first company to collapse in the wake of the legislation. It called in administrators as the management team stepped down.
The company took on GBP 23m of debt when it acquired US-facing online bookmaker Sportsbetting last October. Its main creditor is understood to be Barclays, which has extensive interests in the US. On Thursday the British bank said: „We are contacting our customers to ensure they will conduct their operations in full compliance with the legislation.“
Royal Bank of Scotland is also believed to be putting pressure on its clients to comply with the act. RBS services all player accounts at Israeli-owned PokerStars, the US‘s second largest online poker operator. PokerStars, which had been hoping for a London float valuing the business at GBP 1.6bn, is among the few operators to declare that it will carry on operating in the US regardless of the Safe Port Act. RBS may ditch the company as a result.
Meanwhile, Sportingbet’s accounts indicate a goodwill value of GBP 386m – well above the firm’s market capitalisation of GBP 245m. Some GBP 224m of the goodwill relates to the acquisition of Paradise Poker two years ago, with the remainder mainly comprising goodwill from Sportsbook, acquired in 2002.
Sportingbet shares last night closed down 6.5p, or 10%, at 58.5p – their lowest level since January 2004. Earlier in the year the company had been valued at GBP 2bn. In a statement chief executive designate Andy McIver said: „We are saddened to have to dispose of such a fantastic business as a result of political actions in the US congress.“
Backstory
PartyGaming closed, with immediate effect, to US business. Empire Online issued a similar statement. Others, such as 888, had already indicated their intention to quit the US. Sportingbet sold its US bookmaker Sportsbook for GBP 1, saving the group from GBP 13m in related liabilities and a potential GBP 14m bill to wind down the business. It has closed its Paradise Poker website to US customers. Shares in Leisure & Gaming are suspended as it too seeks to sell its US business. Private group PokerStars, controlled by Scheinberg family, is to continue trading in the US, as is Bodog. Gambling payment specialist Fireone has put a bar on American business, though rival Neteller has yet to make its position clear.