LONDON (Dow Jones)--PartyGaming PLC (PRTY.LN) Thursday acquired Cashcade Ltd. for GBP95.9 million, a move aimed at significantly increasing its share of the $1.5 billion global online bingo market.
It's the online gambling company's first deal since its settlement with authorities in the U.S. over its defunct operations there.
Gibraltar-based PartyGaming will initially pay GBP71.9 million for the London-based bingo and casino operator Cashcade, and up to a further GBP24 million subject to Cashcade's future profit performance.
The deal, which is being financed by existing cash, was well received by investors and boosted PartyGaming shares by 5.8% to 248 pence in a lower London market at 1007 GMT. The stock has risen 27% since January, and 18% over the past 12 months.
Cashcade is partially owned by debt-laden newspaper publisher Independent News & Media PLC (IPD.DB), which holds an 18% stake, and private individuals.
Cashcade's online bingo websites include Foxy Bingo, Think Bingo, Bingo Scotland as well as casino sites such as Getminted.com and Foxy Flutter.
PartyGaming expects the deal to be earnings enhancing before amortization of intangibles in 2009.
Cashcade's earnings before interest, tax, depreciation and amortization more than doubled to GBP12.2 million in 2008 from GBP4.9 million a year earlier. It booked net revenue of GBP44.9 million in 2008, up from GBP28.5 million.
PartyGaming Chief Executive Jim Ryan said the Cashcade acquisition provides the group with "an excellent platform to build a meaningful share of the $1.5 billion global online bingo market."
"Our longer-term strategic objective is to become the market-leader in online poker, casino, sports and bingo," Ryan said in a statement.
As a result of Cashcade acquisition, PartyGaming's share of the global online bingo market will jump to around 6% from a low base, a company spokesman said. Cashcade accounts for around 23% of the UK online bingo market, estimated to be worth $410 million.
The value of the U.K. and global online bingo markets are estimates provided by H2 Gambling Capital, which supplies data and statistics to the gambling industry, the spokesman noted.
Daniel Stewart analyst James Hollins said the deal is "extremely attractive, providing an immediate boost to earnings and a market-leading position in online bingo." Hollins has consequently raised his target price to 366 pence from 339 pence, and with 56% upside to Hollin's target, he retained his buy rating.
Other parties who were reportedly interested in Cashcade included 888 Holdings PLC (888.LN) and Paddy Power PLC (PLS.DEB).
Independent News & Media, which is haggling with its bond holders over EUR200 million of overdue debt, will receive EUR15.3 million for its Cashcade stake after costs. It may also receive incremental proceeds in 2010 and 2011, subject to certain earnings targets being met.
In April, PartyGaming agreed to pay $105 million to U.S. authorities, and in turn the U.S. attorney's office for the Southern District of New York agreed not to prosecute the Gibraltar-based company or its subsidiaries for providing Internet gambling to customers in the U.S. before the federal government's ban of the industry in October 2006.
At the time, Ryan said: "We are now well-placed to seize organic as well as strategic opportunities that previously were beyond our reach."
Original Article: http://online.wsj.com/article/BT-CO-20090723-704584.html