888 Shares Soar 24% On Ladbrokes Acquisition HopesDecember 20, 2010 11:54 am
The news that the UK’s biggest bookmaker Ladbrokes was considering taking over 888.com has sent shares in 888 soaring by almost 24% to around 60p per share.
Ladbrokes was founded in 1886 and owns 2,220 retail betting shops, as well as several online gambling websites. However, Ladbrokes’ online presence is still considered fairly weak and it is believed the acquisition of 888 by Ladbrokes would help address this concern of the company.
A possible takeover of 888 would also suit the solely online-based business which runs a number of gaming sites, but has seen its shares lose two-thirds of their value since the start of 2010.
Despite the markets positive reaction to the news, Ladbrokes was keen to point out that the talks were in the preliminary stages and that “there can be no certainty that these discussions will ultimately lead to an offer for 888 being made, nor as to the terms of any such offer.”
One of the barriers to a deal being struck between the two companies concerns the fact that 888 has failed to reach an immunity deal with U.S. authorities over its online operation and could face future U.S. litigation. This also deterred Ladbrokes’ previous CEO Chris Bell from buying 888 in 2006.
However, it is now believed Ladbrokes are considering offering 70p a share which would value the online venture at £240m, with analyst Simon Davies from Collins Stewart commenting:
“We believe a 70-pence offer should be a slam dunk for (888) investors, but see significant regulatory risk to a successful transaction given that 888 has not procured a non-prosecution agreement with the US Department of Justice, which represents a potential poison pill.”
Nonetheless, Ladbrokes may consider the deal worth the risk considering the gambling market in the US was estimated at $5.4bn in 2009 and is expected to increase in value to as much as $16bn if the US government repeals its gambling laws.