Wagerworks takeover - US$ 90 million deal clinched on San Francisco company

29.07.2005

The big story this week started with whispers that the major land casino slots manufacturer IGT was in discussions with gambling software developer WagerWorks on a US $90 million cash purchase merger.

Within days the speculation was confirmed, with the deal scheduled for completion before the end of August 2005.

WagerWorks recently opened a London office, staffing it with some senior people in what was believed to be part of a strategy to float on the London Stock Exchange, and it is unknown how this will be affected. The company has pursued a policy of not accepting bets from US players, which leaves it with clean hands from a US legal standpoint.

The company has a good working relationship with IGT, having provided software for some of the latter's slot machines despite its more usual business line of software and support for online casino and poker operators outside the USA.

Analysts said WagerWorks' policy of working exclusively in jurisdictions that permit Internet gambling and avoiding companies that offer play in the United States should enable IGT to dodge any regulatory problems.
"This acquisition gives IGT a foothold in Internet gaming without worry about jeopardizing its gaming licenses, since WagerWorks does work for only licensed and regulated sites," said Eric Hausler, a gaming analyst for Susquehanna Financial Group, in a note to investors.

"Internet gambling continues to explode in popularity driven by the proliferation of poker," Hausler said. "We see it more as a vertical play with longer-term accretive implications, although we see IGT more as a back-end supplier and content provider than interested in going into competition against brick-and-mortar customers. We see the acquisition as strategic, not transformational, given a myriad of regulatory issues surrounding mobile or Internet gaming, which may or may not get solved over time."

WagerWorks products power major online casino and poker operations in the UK like Virgin Games and Get Minted, together with Blue Square, Skybet and Paddy Power. It was also recently selected to power up the WPT poker site.

IGT has deep pockets, being a leading company in the US gaming industry - it recently reported results for the quarter ended June 2005 that showed a net income of US$ 114.7 million.