PartyGaming executives
What exactly do PartyGaming get for $100m?
News is expected to be formally released to the financial markets in the next few days about the acquisition of Cashcade Ltd, the London based online gaming company by PartyGaming. The exact terms of the deal remain unclear, however, reports indicate that the acquisition will cost PartyGaming, the FTSE listed gaming company in the region of $100m. Outside of industry circles, little is known about Cashcade. This article aims to provide a little more information on the deal.
Who is behind Cashcade?
Founded in 2000, Cashcade was established by Simon Collins. In 2006, Independent News & Media (INM), owner of The Independent, acquired a 20pc stake in the company.
What do Cashcade do?
Cashcade’s business can be split into 4 different revenue streams.
1. Bingo Sites:
Cashcade operate the FoxyBingo.com and ThinkBingo.com sites. The software is provided under license by the 888 Group Plc. It’s apparent that Cashcade have been successful if building a great brand, particularly with the Foxy Bingo business.
2. White Label Provider:
Cashcade have provided white label gaming solutions to the Ritz, SMG, Trinity Mirror, Associated News and Media and Attheraces.
3. Other revenue streams:
Other revenue streams include the casino site Getminted.com which is powered by software provided by Wagerworks. Cashcade also own and operate a number of portal sites whose sole purpose is to drive traffic to online gaming sites.
Why is Cashcade being sold?
A few months ago Cashcade have hired Jeffries, the investment bank to find a buyer for all or part of the business. It’s apparent that Independent News & Media (INM), owner of The Independent, who owns a 20pc stake in Cashcade has been under pressure for some time to offload assets to assist it in paying down debts. The remainder of Cashcade is owned by management and employees, so the acquisition will offer the chance to release equity for cash.
What are their financial results like?
According to The Times, Cashcade’s last financial statements show that they generated £12m EBITDA on revenues of £45m. The $100m acquisition price is rumoured to consist of a £75m up from payment with an additional $25m being paid depending on performance in 2010.
What is the potential strategy behind the deal?
1. To improve it’s competitive position in the Bingo market:
PartyGaming will acquire one of the UK’s best known bingo brands and as such will increase their share of the bingo market. According to a wikipedia article FoxyBingo had 13% of the UK market share.
2. To secure white label deals:
PartyGaming have been keen to increase it’s white label solutions and are in a position to make the most of Cashcade’s existing white label clients.
3. To strengthen its market position by challenging its main rival:
Foxybingo is powered by software provided by the 888 Group, one of Partygaming’s main rivals. The license between Cashcade and 888 runs through until 2010 and the loss of Cashcade as a client to 888 will come at a blow.
And finally, why did 888 not buy Cashcade - Is it overpriced at $100m?
According to Gigi Levy, 888’s CEO, the 888 Group were interested in Cashcade, but that they weren’t willing to pay the asking price. Levy goes on to say:
“888 is interested in Cashcade but there are other companies that are more interested in it and are willing to pay more for it.”
Is it a good buy?
It’s difficult to say, but the acquisition certainly achieves the dual objectives of increasing it’s market share whilst at the same time inflicting some damage on one of it’s major competitors. Ultimately Party Gaming are acquiring Cashcade’s players, and much will depend on the quality of their customer base and the ease at which Party Gaming can ultimately integrate them into the Party Gaming stable.
For more information on the deal:
Times Article: Online casino’s £100m gamble
Reuters - Impact of Cashcade deal on 888
Cashcade: Home Page
Souce: The Online Pokies Club - the number site for Pokie Games.
This entry was written by admin on Thursday, July 23rd, 2009 at 12:31 am and is filed under Blog.
