London: Online gaming firm PartyGaming said on Tuesday it had reached an agreement with US authorities that will protect it from being prosecuted and opens the door to consolidation across the industry.
The settlement relates to PartyGaming’s activities in the United States prior to the industry being effectively outlawed by legislation introduced in 2006.
The owner of the PartyPoker website said, under the terms of the agreement, it had agreed to pay $105 million, payable in semi-annual instalments over a period ending on 30 September 2012. The deal is expected to open up consolidation opportunities across the industry.
“We are now well-placed to seize organic as well as strategic opportunities that previously were beyond our reach,” chief executive Jim Ryan said.
By 0915 GMT, shares in PartyGaming were up 16% to 253.5 pence, leading the FTSE 250 risers, with rival 888 up 8% to 97.25 pence and Sportingbet rising 10% to 45.75 pence.
On a conference call with reporters, Ryan said the settlement will help PartyGaming gain access to capital with which in could participate in industry consolidation.
He said the company had already approached a number of banks regarding financing and received a positive response.
“We’re confident we’ll have access to capital to meet our M&A desires,” Ryan said.
“We’ve received a favourable indication from the parties we’ve gone to that, once this was resolved, we would have access to not only the equity markets, but the debt markets too.”
Ryan said the company had already identified a number of potential opportunities but was “not significantly advanced” at this stage with any of them.
PartyGaming’s agreement is likely to be followed by other deals between online gaming companies and US authorities. 888 has been involved in similar discussions and has previously said it expected a deal involving PartyGaming would likely be a catalyst for the rest of the industry.
Last month, Sportingbet said it is confident of striking a deal with the US authorities by the end of 2009.
Evolution Securities analyst Ivor Jones reiterated a ‘buy’ recommendation on the stock, highlighting the potential for M&A and bringing more commercial partners on board.
“With the DoJ (Department of Justice) deal done, Party can develop its strategy with certainty over the cash it has available and with partners confident about Party’s future,” he said.
“The potential for sector consolidation makes (debt free) Party look a better investment than the rest of the market.”
PartyGaming said first-quarter group revenue fell to $100.1 million, compared with $128.9 million in the same period last year, due primarily to a negative impact from currency translation as a result of the strength of the US dollar.
Average daily revenue was up 2% compared with the previous quarter.
Poker revenue fell to $53.6 million from $80.7 million, which the company said was due to foreign exchange movements and competitive pressures from United States-facing sites.