Hindsight, as they say, is 20/20. And right now, hindsight is being quite critical of bwin.party’s decision to accept the acquisition offer of GVC Holdings over that of 888 Holdings earlier this month. According to UK newspaper The Independent, “observers have questioned the logic of choosing a far smaller player to take it over,” particularly when the value of the deal hinges greatly on the acquirer’s share price.
It was a back and forth bidding war for the parent of partypoker with both GVC and 888 putting in multiple bids, but in the first week of September, it was GVC which won the day. The deal was part cash, part stock. For each share of bwin.party they owned, the company’s shareholders will receive 25 pence in cash plus .231 shares of GVC Holdings. At the close the London Stock Exchange on September 3rd, the day the deal was inked, GVC’s stock was at 453 pence per share. Based on the terms of the deal, the stock portion of the acquisition was valued at 104.643 pence per bwin.party share. Add that to the cash portion and the total value of the purchase was 129.643 pence per share of bwin.party.
This price was significantly higher than 888’s initial offer, which was for 104.09 pence per share. Bwin.party’s Board of Directors actually recommended that offer to its shareholders initially, even though GVC’s first offer was for 110 pence per share. The Board cited numerous corporate synergies between 888 and bwin.party, including office locations and similar licenses, as reasons to go with the less lucrative option. But once GVC increased its offer, bwin.party began to look at GVC much more seriously, eventually going with the smaller rival even when 888 upped its offer at the last minute (reportedly for 115 pence per share, but that was never officially announced). Even though bwin.party said GVC offered more significant cost savings, it clearly looked like a decision made based on price.
The problem bwin.party is running into right now, though, is because of the way the deal was structured, the end value provided to shareholders remains in flux. GVC’s stock price has fallen since the two parties shook hands. Now at 402.50 pence per share, the stock portion of the purchase is currently 92.98 pence per share. Thus, the total acquisition price is 117.98 pence per share, barely more than the rumored 115 pence 888 offered at the end of discussions.
As many critics saw 888 as a much better fit for bwin.party than GVC, some are arguing that bwin.party is looking very short-sighted now, opting for more money at the time than the (perceived) better partner. It is also thought that GVC may end up selling the pieces of bwin.party that do not fit with GVC’s sports betting core. The Independent reports that this might mean the casino gaming unit would go, but earlier rumors were also that partypoker could be sold.
In its first proposal to bwin.party, GVC partnered with PokerStars and Full Tilt parent Amaya Gaming to help finance the deal. It was thought that if they won the bidding war, they would split up the company with Amaya taking partypoker and GVC keeping the rest. After Amaya was removed from the deal, later rumors, somewhat in line with current ones, were that GVC could end up selling partypoker to Amaya.