With the impending merger of bwin and Party Gaming come discussions between the two companies of what exactly to do with their online poker networks. Many had simply assumed that the networks would be combined and one company’s software platform would be used, but now, according to eGaming Review (EGR), it is looking more and more likely that bwin’s Ongame Network will be jettisoned.
According to a bwin spokesperson quoted in an EGR article this week, the Ongame Network is considered to be a “surplus asset” that is “no longer needed.” “Ongame may be repackaged, offered to a potential buyer. Partnerships are also thinkable, where they would take an interest. But no deadlines for this have been decided,” the spokesperson told EGR.
While it appears inevitable that Ongame will be sold in some way, it won’t necessarily happen as soon as Party Gaming and bwin merge at the end of the quarter. There is a chance the new company may sit on it and see if online poker eventually becomes legalized and regulated in the United States, which would almost certainly increase the demand, and therefore the price, of the network.
For reference, bwin purchased the Ongame Network, headlined by PokerRoom, in 2005 for £474 million. PokerRoom was shutdown in April 2009 after ten years of operation and its players were transferred to bwin.
“We understand that that the American gaming industry wants online poker regulated, as they want access to that revenue stream. Regulatory developments in the U.S. would raise interest in these assets. But we haven’t yet established any firm deadline and will look at all options,” the bwin representative said.
It is not completely clear what the sale of the Ongame Network means as far as the combined company’s player base. What it seems to mean is that bwin players will be moved to the new Party Gaming/bwin network, while the rest of the Ongame Network, which includes such rooms as Betfair and Hollywood Poker, will be split off. This also may mean that company executives feel that the money to be made from selling the network is greater, or at least more immediately useful for reinvestment, than the future revenue streams from Ongame’s players.
According to online poker tracking site PokerScout.com, PartyPoker is currently the fourth largest poker room or network in terms of cash game traffic, with a seven-day average of 3,950 players. Ongame ranks seventh, with 2,900 cash game players per day. If Ongame and Party were to combine their player bases, the resulting network would still likely be in the fourth spot, although it would have a comfortable cushion over the iPoker Network, which has 3,750 cash game players on average over the last week.
Party Gaming and bwin first announced intentions to merge last July and issued a massive 478-page tome to shareholders with details. At the end of January, shareholders of both firms voted to approve the merger, which will create the largest online gaming company in the world. bwin shareholders will own 51.6% of the company, which will be renamed bwin.Party Digital Entertainment plc.
As stated in Party Gaming’s shareholder prospectus, bwin.Party would be a business with unaudited net revenues of €696.2 million, unaudited clean EBITDA of €193.7 million, unaudited profit after tax of €99.4 million, and unaudited net assets of €1.27 billion after consolidation adjustments.
While it will be one company, Party Gaming and bwin will still retain their current brands and the headquarters of each will remain in place, Party Gaming in Gibraltar and bwin in Austria. Party Gaming’s CEO Jim Ryan and bwin’s CEO Norbert Teufelberger would become Co-Chief Executives.
Said Ryan after shareholder approval in January, “This is a transformational opportunity for both our companies to create the world’s largest listed online gaming business. With market-leading positions in poker, sports betting, casino, and games, the enlarged group will have a winning formula to exploit the growing online gaming market, supported by a strong balance sheet, significant cash flow generation, and a highly experienced management team.”
