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PartyGaming strikes two poker deals in revamp

By Pete Harrison
November 11, 2005

LONDON (Reuters) - Online poker operation PartyGaming said it was taking over two of its four partners and ending its relationship with a third as it prepares to launch a new, upgraded service.

Friday's news put pressure on Empire Online, the fourth partner, which PartyGaming is also in talks to buy, analysts said.

PartyGaming said it had agreed to pay $14.5 million (8.3 million pounds) cash for Multipoker and was buying most of IntertopsPoker, which sources close to the deal said had gone for about $4 million cash.

The two deals add about 300,000 players to PartyGaming's PartyPoker Web site, but more importantly give the company access to Multipoker's Scandinavian clientele.

PartyGaming's shares were up 1.6 percent to 93 pence by 11:36 a.m., valuing the group at around 3.7 billion pounds.

A third partner, Coral Eurobet, is due to leave PartyGaming's online poker platform, migrating its players to a new platform over the next few weeks, it added, confirming a Reuters report last week.

RISE AND FALL

"We now look forward to the launch of the Party-branded integrated platform in the first half of 2006, when we will expand the number of games available to our customers," PartyGaming Chief Executive Richard Segal said in a statement.

PartyGaming listed in June with a market value of 4.6 billion pounds, swiftly rising to more than 6 billion.

But cautious language in a September statement spooked investors, wiping 2 billion pounds off its value, and its shares have not yet recovered the lost ground.

Empire Online was founded by marketing guru Noam Lanir, son of an Israeli war hero, and listed on AIM in June.

After a 790 million pounds bid by rival Sportingbet (SBT.L: Quote, Profile, Research) was aborted in September, its shares have waned as various moves by PartyGaming have illustrated the vulnerability of Empire's customer base. It is now worth around 250 million pounds.

Players on PartyGaming's four partner sites, known as 'skins', have been able to compete with each other in the online poker room, but the loss of players from IntertopsPoker, Multipoker and Coral Eurobet leaves those of Empire Online on their own.

This represents a 40 percent reduction in the number of players, analysts said, raising the risk that Empire will lose its own players as they follow the herd.

"PartyGaming is using this to further squeeze down the price it pays for Empire -- that's if it bothers at all," said Robin Chhabra at Evolution Securities.

"They're just deciding now if they're going to squeeze it and then buy it, or just kill it," he added.

Empire's shares had lost 22 percent since Reuters reported last week that Coral Eurobet had decided to go it alone, and by 11:36 a.m., they lost a further 1.7 percent to reach 86 pence.

Source: Reuters