888 exec: Our bwin deal could be greatest industry merger

An 888 takeover of bwin.party could be the most successful merger in egaming history, its chief operating officer Itai Frieberger (pictured) has told eGaming Review.

In an exclusive interview, Frieberger said success would be achieved not only by making cost savings but more importantly by providing a platform to grow revenues through a leveraging of its “unrivalled back-end system and CRM capabilities”.

“I think we have more tools and capability, more leverage and more dial to spin and turn to make this merger a success than GVC does – it’s less about firing people and cutting costs, and more about pushing the business forward,” Frieberger told eGR.

“This merger could become one of the most successful mergers of the industry, not simply by cutting costs but by creating a more effective operator – an operator with all four verticals powered by the same marketing platform.”

However 888 must first secure a deal for bwin.party and the firm is currently locked in a protracted battle with rival bidder GVC Holdings, which recently trumped 888’s 104p per share bid with a 125.5p proposal of its own.

GVC has also pledged to realise €135m of cost synergies, almost double the amount highlighted by 888, although whether the larger figure is achievable has yet to be determined by the bwin.party board.

Yet despite a lower bid 888 remains the preferred bidder, and with the majority of both bids made up in shares, Frieberger said the value of the headline offer won’t be the deciding factor.

According to Frieberger, central to the bid will be how much value each bidder can bring to the combined business and the upside they can offer the bwin.party shareholders – an area where 888 feels it has an edge over its rival.

The operator plans to add bwin’s proprietary sportsbook to its in-house casino, poker and bingo products and run all verticals off its back-end system to create an enhanced cross-sell opportunity and increase players’ LTV. In addition, a combination of poker networks will also drive turnover and perhaps more importantly boost liquidity, according to Frieberger.

“The headline number is less critical and it’s not about synergies or cost savings – it’s about how you take the bwin.party customers, brands and technology and make them far more effective than they were before,” Frieberger said.

“Just look at what 888 has achieved over the past four or five years – $28m EBITDA in 2010 to more than $100m EBITDA in 2014, and that’s all organic growth. It’s about using our sophisticated technology, our CRM methodology, our efficient marketing tools, our acquisition capabilities – when you apply all of those to the bwin customers you’ll have a massive upside.

The firm also plans to generate additional revenues by spinning-off the bwin.party technology to create a B2B business called Studios, which 888 has said would help maintain revenues during a potentially disruptive integration phase.

Frieberger also explained why 888’s experience in both regulated and unregulated markets could be a key differentiator between itself and GVC. 888’s business is currently split about 50/50 while GVC generates a large majority of its revenues from unregulated territories.

“We are about 50% regulated to unregulated so we know how to operate in both markets and I think we are extremely good at handling the transition from unregulated to regulated, which is key in this industry,” Frieberger said.

“Everything in Europe is going to become regulated – we see Romania, Hungary, Portugal, the Netherlands and potentially Russia regulating and you need to have experience, knowledge and a track record of successful penetration of regulated markets. You need to be able to adapt and only we are bringing that to the table. And I haven’t even mentioned the US piece yet,” he added.

Despite admitting his frustration at not yet sealing the deal, and his enthusiasm for integrating the two businesses, Frieberger said he would not be drawn into a bidding war which could potentially place the 888 business at unnecessary risk.

“At some point there is a line in the sand that you need to draw but it seems not everybody sees it this way,” Frieberger said. “Things in this industry can go wrong and when they do you don’t want to find yourself overstretched as it could become critical to the business.”

The bwin.party board is expected to report on GVC’s most recent proposal in the coming days.