Monday October 1, 2012 : WHAT WILL AMAYA PAY FOR ONGAME POKER NETWORK?
French press reports that acquisition will cost four times the speculated price
Despite the absence of company statements – one is expected from Amaya today – the rumoured sale of Bwin's Ongame Poker Network to Montreal-based Amaya Gaming remained the subject of continued speculation over the weekend.
The original rumour, which suggested that Amaya would be paying as little as $6.5 to $8 million, was revised sharply upward when the publication iGaming France reported that the asking price was actually around four times that at $26 million. Presumably today's statement from Amaya will confirm that.
Certainly that number would be more in line with the deal that Shuffle Master reversed away from in June after making an offer of Euro 29.5 million .
Back then, Shuffle Master chief executive officer Gavin Issacs said: “It has become evident to us that Ongame’s operations post-acquisition will not achieve the near-term results we initially expected and will require a larger ongoing investment than anticipated.”
Bwin acquired Ongame in a December 2005 share purchase agreement worth in total around Euro 473.6 million. At that time Bwin boasted that the poker network had more than five million registered customers and in Q3 2005 more than 260,000 real money players, making it one of the largest worldwide. 2004 sales grew by approximately 253 percent with an operating margin of approximately 33 percent.
Bwin paid for the acquisition through:
• 40 percent in Bwin stock at an issue price of Euro 65.19
• 45 percent in cash to be raised from different sources, including equity.
• 15 percent of the consideration retained by Bwin as a deferred contingent payment until Q1 2009 depending on certain financial and operating criteria in 2006.
Bwin's subsequent merger with the Party Gaming group, which included the highly successful Party Poker operation, made Ongame surplus to requirements, and the merged companies have been trying to sell off Ongame since 2011.
In an interesting aside to the Amaya-Ongame story, respected poker writer John Mehaffey opined this week that the price paid could be an indicator of the value (or lack thereof) of the Absolute Poker software which the Department of Justice appears to be planning to sell off after its Black Friday hammering of the controversial company.
At http://www.legalpokersites.com/blog/ongame-sale-proves-absolute-poker-software-worthless/ Mehaffey points out that the Absolute Poker software currently being fought over in US courts has no documentation and is over 50,000 lines of code, all in Korean, rendering it substantially less valuable and usable than Ongame, and making the owed players' chances of recovering even a percentage of their money doubtful.
UPDATE Monday a.m:
Bwin.Party Digital Entertainment confirmed the sale of Ongame to Amaya for up to Euro 25 million "on a cash-free and debt-free basis."
The company disclosed the main features of the agreement as:
• Initial consideration of Euro 15 million payable in cash on completion expected during the fourth quarter of 2012
• Additional payments of up to Euro 10 million will become payable if there is regulated online gaming in the United States within the next five years
• Completion is subject to the standard conditions for a transaction of this type, including regulatory approvals
Commenting on the announcement Monday, Jim Ryan and Norbert Teufelberger, the Co-CEOs of bwin.party, said:
“The sale of Ongame conforms to our strategy, especially as we move closer to launching our single, proprietary technology platform in the next few months. We believe Ongame will fit well into Amaya Gaming and has an excellent future ahead.”
David Baazov, Chief Executive Officer of Amaya Gaming, said:
“The acquisition of Ongame bolsters Amaya Gaming’s product portfolio, transforming Amaya into a leading provider of gaming platforms. Amaya looks forward to unleashing Ongame’s technology to its full potential through the leveraging of our many B2B relationships and delivering new partners and players to the network. The Ongame platform is scalable, proven and secure and is well suited for quick deployment in new regulated markets. We’re excited about the wide range of opportunities this acquisition makes possible for us as we execute on our vision.”
The Ongame network includes 25 e-gaming industry brands that are owned by a total of 19 operators. Ongame also operates regional networks in France and Italy.