Friday, June 03, 2005

Gibraltar based company in multi-billion move

PartyGaming, the Gibraltar-based internet gambling business, yesterday unveiled plans for a multi-billion pound stock market flotation that will make it the only company on the Rock listed on the London Stock Exchange.

PartyGaming plans to list 23% of its shares on the London Stock Exchange through an offer to institutional shareholders to be completed by the end of this month.

The listing is tipped by analysts to value the company at up to £5.5 billion, which would give it a market capitalisation greater than many established big names, including household brands like British Airways.

PartyGaming, which owns and runs the world’s biggest online poker brand, PartyPoker, is cashing in on the growing popularity of internet gambling.

The company has its headquarters on the Rock, where it employs about 120 employees and from where it manages its technical, financial and administrative operations.

Local legal and financial experts said yesterday that the announcement was welcome news for the Rock because of the direct and indirect economic benefits that the company generated.

They were also hopeful that this first flotation of a locally based company could open up the doors for other businesses to follows suit in the future.

PartyGaming’s star product, the PartyPoker.com online poker gaming room, has attracted more than one million users since it was set up in 2001. Customers pay a type of commission known as rake to play against each other on individual tables of up to 10 players or in tournaments.

Online poker generated about £305 million or 92% of PartyGaming’s revenue in 2004, helping it to make annual pre-tax profits of £204.6 million, up from £49.1 million the previous year.

The group, formerly known as iGlobalMedia, also has gaming brands including Starluck Casino and PartyBingo.

It has more than 1,000 staff, including 126 in Gibraltar, 57 marketing staff in the UK and 925 customer support and software development workers in India.

PartyGaming said its employees would get a 5.6% stake in the group through the listing. At that valuation, the stake would be worth a total of £309 million to the staff, who work primarily in the company’s head office here and in administration centres in India.

Operations director Anurag Dikshit, husband-and-wife team Ruth Parasol and Russ DeLeon and Vikrant Bhargava, who own the group between them, could net about £1.1 billion from the proposed sale of 23% of their shares.

Yesterday, the company also unveiled ambitious growth plans that will likely see it consolidate and expand on its presence in Gibraltar.

Chief executive Richard Segal said the company intended to drive growth by further exploiting core markets, moving the Party brand into new geographic areas, creating new games and using new distribution channels such as mobile phones and other wireless applications.

“A listing will provide us with a solid foundation to achieve these goals,” he said.

Justin Urquhart Stewart at Seven Investment Management said PartyGaming was “raking in huge amounts of money.”

However, he said the company needed to be on its mettle to stave off the potential threats of “competition, regulation and corruption” in the gambling industry. It was bound to face a challenge from rivals with competing products, particularly the more established players in the leisure industry. “Investors should be wary because this is a typical case of a fashion fad that could easily turn into a tank top,” he said.

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