Merger Mania Emerges for Online Casino Entrepreneurs
Earlier this month, PartyGaming, the world's largest Internet poker site, spent $131 million to buy Bulgarian-based Gamebookers, sports betting site concentrated on Continental European customers. Then, this week, Gibraltar-based PartyGaming is also the top candidate to bag rival Victor Chandler, the London-based firm, which has virtually no U.S. clientele.
Other companies, perhaps anticipating problems in the U.S., began acquiring companies even earlier than those brand names. Vienna-based Bwin Interactive Entertainment bought Swedish poker site Ongame for $643.5 million last December. Wall Street analysts say 888 Holdings is also scouting opportunities outside the U.S. Stockholm-listed Unibet Group which runs unibet.com and is active primarily in the Scandinavian market, but is also a potential merger, or acquisition partner, for other firms.
Last year Americans gambled about $5.9 billion online -- nearly half the worldwide total. PartyGaming scored about 85 percent of its $1 billion in 2005 sales in the U.S.
Probe Gives Pause
But the federal government’s probe against BetOnSports.com in the U.S. has given pause to many online gambling executives."The Department of Justice is scaring the whole industry," said Tej Randhawa, an analyst at Evolution Securities.
Online casino executives are not just looking to Europe, though. They are also eyeing Asia. Online gambling in the region is growing fast and is still untapped," said Leighton Vaughan Williams, director of the Betting Research Institute at Nottingham Trent University, in the U.K.
Last year, the Asian market, come in at $2.1 billion last year, about one-third the size of the U.S. gambling market, but it is expected to triple between now and 2010, making it as big then as the U.S. market is today. Credit card and debit card usage is also growing there.
Promising Markets
The most promising markets are Japan and China, but the government in the region is a major concern for betting sites, said Greg Harris, an analyst at investment bank Canaccord Adams.Though there are some jitters, revenues for most online gambling companies continue to grow at more than 40 percent yearly, a recent Dresdner Kleinwort report indicated. The business is so big -- and lucrative -- that many operators are willing to tough it out, hoping for a major payoff.
One prime example -- U.K.-based Sportingbet.com, who’s gambling sites include sports-betting site sportbook.com and paradisepoker.com. A company spokesman said its strategy is simply, "business as usual." Still, a spokesman acknowledges that the company is aiming to reduce its reliance on the U.S. market, over the long-term.
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