There is a battle brewing over the right to acquire Gibraltar-based online gambling company Bwin.Party Digital Entertainment, which owns popular brands PartyPoker and World Poker Tour. On one side is 888 Holdings Public Limited Company, which is a gambling website that provides online casino games through 888casino and other sub-brands for download and play on the Internet as well as mobile devices. Its competitor, GVC Holdings is a business-to-business and business-to-consumer provider of online gaming and sports betting markets that teamed up with industry juggernaut William Hill Plc in 2013 to take over Sportingbet Plc. Both entities know the business of gambling; they are now entering into a far more risky domain -- waging a war of bids where the price tag continues to escalate.
The bidding war is quite confusing. The story actually starts with 888 being named the winner of a $1.4 billion battle for Bwin.Party Digital Entertainment. That was roughly one month ago, when it seemed clear that 888 was acquiring Bwin.Party for a mixture of cash and stock. Executives were quoted confirming that the deal was done, and Bwin.Party's second largest shareholder Jason Ader expressed joy, stating, "I believe not only are 888 the best buyer for this company but that its management team will realize significant long-term synergy value for our shareholders with the least amount of execution and regulatory risk."
Yet, days later it appeared that the $1.4 billion bid that seemed to have been accepted was no longer sufficient to close the deal. In came GVC with a $1.6 billion proposal to acquire Bwin.Party and void an agreement that 888 believed to be valid and binding. GVC's bid was purportedly a mixture of cash and stock, similar to what 888 had offered, but at a heightened price.
Only a few days ago, GVC again raised its bid (albeit only slightly -- from 1 billion pounds to 1.03 billion pounds) in an effort to put it over the top and persuade Bwin.Party to side with GVC, which is backed by U.S. private equity firm Cerberus Capital Management. The bidding war continues, but one important question must be asked. Exactly whom is GVC bidding against?
While GVC has been actively attempting to push up the price for Bwin.Party, even resorting to what seems to be negotiating against itself by raising a bid without the introduction of a new, higher competing bid, it remains that Bwin.Party reportedly struck a prior deal. If 888 presented an offer to Bwin.Party and Bwin.Party accepted the offer, then unless a closing condition is not present, it seems unlikely that Bwin.Party could back out but for breaching the terms of the deal. GVC may be positioning itself as a threat, but unless Bwin.Party can somehow back out of its lighter priced deal, it may be bound by same.
The only thing that is clear in this high stakes takeover bid for Bwin.Party's assets is that it includes a confusing web of statements that contradict each other and may simply end up driving the final purchase price of Bwin.Party to more than what 888 envisioned on paying.
Even Ader, who previously provided statements that at least made it seem as though 888 had won the right to purchase Bwin.Party, has changed his tone. He recently stated that GVC's new offer was "just enough to start a conversation." What that conversation entails is unknown at the moment. However,
Ader also commented that "[t]here are a lot of risks and uncertainties with this GVC bid."
Negotiations are expected to continue between the parties over the next 1-2 weeks. It is known that 888 will push forth rhetoric explaining that a deal is a deal, and that GVC cannot enter a race after its victor has been chosen. However, Bwin.Party does not appear to be paying much attention as it continues to engage in discussions with GVC while bid amounts increase week-to-week.
In fact, GVC and Bwin.Party may be alleging that a prior deal involving Bwin.Party was never concluded. According to a report from July, the "purchase" of Bwin.Party by 888 was based upon a note that stated, "The boards of 888 and bwin.party are pleased to announce that they have reached an agreement on the terms of a recommended offer pursuant to which [888 Holdings] will acquire the entire issued and to be issued ordinary share capital of bwin.party."
This may come down to whether an agreement on a recommended offer is binding with regard to a $1+ billion transaction. In the meantime, the bidding war continues with 888 believing it has a deal in place and GVC continuing to up the ante.
Darren Heitner is a lawyer and the Founder of South Florida-based HEITNER LEGAL, P.L.L.C., which has a focus on Sports Law and Entertainment Law.
