US casino supplier Shuffle Master has pulled out of a deal to buy the Ongame poker network from bwin.party, blaming deteriorating conditions in the European poker market.
Shuffle Master (CEO Gavin Isaacs pictured above) agreed in March to pay an initial €19.5m for the Stockholm-based business, and a further €10m if regulated online poker started up in the US within five years of the deal ccmpleting this summer.
But London-listed bwin.party announced this morning that the two parties had “mutually agreed” not to proceed with the proposed transaction, and that bwin.party was “re-engaging” with other third parties that had previously expressed an interest in buying Ongame.
Isaacs of Nevada-based Shuffle Master followed this up with a later statement that deteriorating business conditions in Europe since February, when they first put pen to paper on the deal, had eroded their belief that “Ongame’s sales pipeline supported the purchase being neutral or modestly accretive to the Company’s EBITDA.”
He 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”.
The Shuffle Master chief added that continued uncertainty over when online poker would be regulated and start up in the US had also influenced the company’s decision. “After thorough due diligence we believe this is the right thing to do for our Company and our shareholders.”
Isaacs comments echoed an earlier note by Dublin-based analyst David Jennings of Davy Stockbrokers that said: “The company [bwin.party] says that Shuffle Master had a change of heart subsequent to the announcement and that the u-turn reflected its increasing nervousness about the European online poker environment.”
These doubts over the European poker market and the deal itself did not however prevent Shuffle Master announcing two B2B deals earlier this month to provide the Ongame poker technology to slot machine manufacturers Bally Technologies and Aristocrat, suggesting there may be additional reasons to come for the collapse of the deal.
Shuffle Master earlier his month launched a trademark and copy infringement action against US mobile developer Avalinx over the latter producing copycat versions of Shuffle Master’s Let It Ride and Three Card Poker games, versions of which appear on bwin.party’s websites without acknowledgement of Shuffle Master’s copyrights and trademarks, according to Pokerfuse, suggesting grounds for a potential legal dispute between the two companies.
Other third parties understood by Casino Choice to have previously expressed an interest in buying Ongame included Canadian software provider Amaya, that recently acquired casino software businesses Chartwell and CryptoLogic.
Ongame runs a open dot.com poker network and regional networks in France, Italy and Spain, with around 25 brands operating poker rooms on the software platform, including Betfair, Betsson, Betsafe, EurosportBet and Paf.
It is currently the fifth largest site/network measured in terms of cash player traffic (Source: PokerScout) but this is expected to fall by well over half when bwin.party completes the migration of the brands it owns onto the Party Poker platform by the end of this year, with the pooling of dot.com liquidity of its brands set to complete by the end of this month, followed by the integration of liquidity in its segregated Italian, French and Spanish player pools. This will include all bwin-branded rooms, PartyPoker, GiocoDigitale, and its ex monopoly partners in France and Denmark, PMU and Danske Spil.