When I last wrote about the gambling sector back in February, I felt that consolidation was in the air. I mentioned that two players, GVC Holdings (LSE: GVC) and Playtech (LSE: PTEC), had openly stated that they were on the hunt for targets.
On The Acquisition Trail
It seemed like GVC had found such a target when, on Friday, the sports betting and gaming company confirmed that it had submitted a proposal to buy one of its rivals,Bwin.PartyDigital Entertainment (LSE: BPTY).
Shares in the FTSE 250 company spiked over 11% on the day to 99.45p their highest level since February as traders started to factor in a bid premium into the price, coupled with the prospect of a higher bid from another potential suitor.
Only in March, GVC Holdings CEO Kenneth Alexander had admitted that his company could be interested in a bid for Bwin. If successful, the deal would be treated as a reverse takeover due to Bwins size. Confirming the approach, Bwin reaffirmed that it wascontinuing discussions with a number of third parties, having received revised proposals.
On Monday of this week, it was confirmed that 888 Holdings (LSE: 888) had also made an approach, in a cash and share offer, already supported by around 59% of shareholders, sending Bwins shares over 7% higher on the day.
Not to be outdone, however, GVC and Canadian company Amaya Gaming have teamed up for a bid to purchase and then break upthe company.
A Good Strategic Fit?
Amaya Inc, a CAD$4bn+ organisation listed in Toronto, owns brands includingPokerstars and Full Tilt Poker, and is believed to be eyeing up Bwins poker assets and possibly its sportsbook.
There is talk of plans between Amaya and GVC to set up a special purpose vehicle to snap up the FTSE 250 firm, in a purchase that would be paid for with a combination of cash from Amaya and GVC shares, although it is currently unclear how this will look or work in practice
The duo are hoping that joining forces will trump the approach from online gambling business 888 Holdings.
The rival suitor said that it believes that there is significant industrial logic in a combination of 888 andbwin.party, benefiting both companies and all shareholders.
With the election out of the way, it seems that the Conservative majority has calmed fears that the industry would be further regulated and subjected to more punitive taxes going forward.
Indeed, as early as November 2014, the firm confirmed that it was in talks with a number of interested parties about a variety of potential business combinations. Deutsche Bank has been handling the process to date.
Whos My Money On?
Well, GVC has previous form when it comes to joint takeovers, having teamed up with William Hill a couple of years ago by breaking up Sportingbet. The bookmaker acquired the Australian business and Spanish operations, while GVC took on the assets in countries where the risks are greater because regulations are not as clearly defined.
Since then, the AIM-listed firm has done an excellent job absorbing the unregulated businesses from Sportingbet, streamlining the business and showing good growth, even in the face of a rather weak Euro. Bwin is exposed to these grey markets, with roughly half of its revenues generated from countries that lack gambling regulation.
Trading at the company has been weak for some time, and last year it was targeted for a shake-up by American activist investor SpringOwl. It is clear that the company needs to do something to realise its value given GVCs past track record, my money is on them.
Whilst it is true that some traders will make their fortune by betting on the correct stock, some could find that they have lost their shirts. There is a better way to invest in this market, and you can find some further details in this special free report.
Entitled“10 Steps To Making A Million In The Market”you will learnhow following ten simple steps can seriously improve your wealth – the key is starting early!
This report is currently completely free and without obligation but won’t remain available forever, so don’t delay!Click hereto receive this report – right now.
Dave Sullivan owns shares in GVC Holdings. The Motley Fool UK has recommended GVC Holdings. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.