Shuffle Master explains Ongame deal collapse
CEO blames economic uncertainty in Europe but does not reveal alternative plans to launch B2B poker offering.
Shuffle Master chief executive Gavin Isaacs has blamed the uncertain economic climate in Europe, coupled with the slow progress of US regulation, for the collapse of the US supplier’s deal to acquire the bwin.party-owned Ongame Poker Network.
In a statement released this afternoon Isaacs (pictured) said that the worsening state of the economies in a number of European countries, the prospect of a higher outlay than the original acquisition cost of 19.5m “ potentially rising a further 10m should US regulation pass within a five-year period “ to ensure the business’ profitability contributed to the decision to pull out of the deal.
“When we signed the definitive agreement in February, we believed that general market conditions and Ongame’s sales pipeline supported the purchase being neutral or modestly accretive to the Company’s EBITDA,” Isaacs explained.
“Business conditions in Europe have deteriorated since February and as a result, it has become evident to us that Ongame’s operations post-acquisition will not achieve the near-term results we initially expected and will require a larger ongoing investment than anticipated,” he added.
Despite Nevada issuing its first egaming licences to service providers last week, with Bally Technologies and IGT both securing approval alongside UK operator William Hill, Isaacs also cited the slow progress of US regulation as a reason behind the collapse, explaining: “Although we believe in its eventuality, there is also uncertainty surrounding the timing of legalization and the rollout of online poker in the US at both the state and federal levels.”
Both Bally and IGT acquired European egaming assets ahead of their licence reviews, with Bally acquiring Chiligaming’s iGaming Platform in February this year, and IGT purchasing the Entraction Poker Network for US$115m in May 2011.
While not going as far as to reveal any alternative plans or potential deals, Isaacs pledged that Shuffle Master would “Continue to pursue opportunities to achieve our growth objectives in the online space, including leveraging and protecting our strong intellectual property and brands, and will investigate all prospects “ both organic and acquisitive “ that make strategic and financial sense.”
However, chief strategy officer Lou Castle hinted that the supplier may look to leverage its existing assets and potentially develop a poker offering in-house, or partner with another company rather than making an outright acquisition:
“We are considering other options for providing a business-to-business online poker product consistent with our other online offerings for web, social media and mobile applications,” Castle explained. This conforms to Isaac’s admission in an interview in January this year, which suggested that he was looking to set up joint ventures rather than acquire.
It is unknown how the failure to buy Ongame will affect the partnership agreed between Bally, Aristocrat Gaming and Shuffle Master earlier this month. Under the terms of the deal Shuffle Master would have integrated the Ongame software onto Bally’s iGaming Platform, and integrate the poker software into Aristocrat’s online games portfolio. None of the companies involved have yet made a comment on the future of the deal.
This morning bwin.party revealed that it was “re-engaging” with other parties interested in purchasing Ongame in the wake of the collapse, saying that it was “confident that [it] can conclude a deal with an alternative third party.”