Big Merger News In The Online Gaming Industry
There may be another mega-merger on the horizon. Ladbrokes and 888 are talking about merging to form a mega online gaming company. Powered by Microgaming, Ladbrokes offers all online gambling products. The company, 888, owns software provider Dragonfish. Ladbrokes has valued 888 at around $314 million. Both companies have also told the London Stock Exchange they are in preliminary talks.
Talks Initiated in 2006
Despite the excitement, this is not the first time these two companies have discussed a merger. In 2006, talks were initiated but did not proceed due to the passage of the UIGEA in the United States. At this time, 888 was nearly double its current value. One potential issue that could arise is the fact that 888 does not have a non-prosecution agreement with the United States Department of Justice for activities before the UIGEA.
The Decline In Share Price
At the end of May 2010, 888 posted a profit warning which caused a 13 percent decline in share price. Since that time there has been a great deal of speculation as to who will bid on their stock. In August 2010, the CEO of 888 stated the company will be talking with other gaming operators as well, one of whom was Ladbrokes. At that time Ladbrokes highlighted that it was too early to speculate on specific conclusions.
The Future of Online Gaming
The future of online gaming is currently a huge topic in the industry and is constantly being discussed at expos and conferences. These discussions are based on the national regulation of online gambling in Europe and the expectation that it will become legal in the United States. Therefore, the prediction has been made that the online gaming market will eventually be cornered by a select few operators and smaller operations will shut down.
As the industry is currently seeing, this prediction is becoming a reality. Just this past year, PartyGaming merged with BWin to form a massive online gaming company. If Ladbrokes and 888 merge, this will be another step in that direction. Although larger companies will have the resources to entice new and retain old players, there will be a lack of selection and choice which could result in a lack of innovation and hurt the industry.
A large bearing on the gaming industry moving in this direction will be the legalization of online gambling in the United States. This could result in plenty of new companies opening their virtual doors adding new selection.