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Gambling group ups pay despite slump in share price

By Amanda Andrews
December 30, 2006

PartyGaming has awarded more shares and multimillion-pound bonuses to its senior executives, despite the group’s plunging share price, in a move that could irritate institutional shareholders.

The online gambling group’s new management incentive arrangements will take the new incentives and bonus package of Mitch Garber, the chief executive, to about £18.5 million.

Although the figure was less than the £40.5 million that Mr Garber’s share options package was valued at in April, the share price has fallen from 150p to 31¾p in the same period.

Shareholders that bought into PartyGaming at the initial public offering in 2005 and the secondary placing in June have lost about £925 million.

The company argued that the Unlawful Internet Gambling Enforcement Act in the United States has “severely impacted the value of incentive arrangements for the executive directors and other key employees of the group”.

PartyGaming defended the move as vital to secure the most talented management. A spokesman said: “Some institutional shareholders asked us what we were going to do to incentivise executives, what with the share price coming down so much. I don’t think you can please all shareholders, but many were concerned that we couldn’t retain senior people.”

Mr Garber has had the shareholder return performance targets scrapped over his options for 20 million shares. The 20 million shares can be awarded next year in eight monthly tranches from May to December. He has been granted new share options of a further 15 million shares, which will vest in 30 equal monthly tranches until May 2009. He will also be paid £3 million in cash in 30 equal instalments until May 1, 2009, and will receive a minimum bonus of £2 million provided he remains with the company on December 1, 2007.

Michael Jackson, chairman of PartyGaming, said: “PartyGaming has the leading executive team in online gaming. Whilst the passing of the Unlawful Internet Gambling Enforcement Act changed the business environment, the online gaming sector has remained no less competitive both in terms of attracting and retaining talented individuals.”

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