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bwin.party was formed from the merger of bwin Interactive Entertainment AG and PartyGaming Plc in March 2011 to create the world’s largest listed online gaming company.
PokerStars' US settlement appears negative for Bwin.party, says brokerAugust 01 2012, 4:12pm
The implications for FTSE 250 online gaming company Bwin.party (LON:BPTY) appear to be negative following PokerStars' US$731 million settlement in the US yesterday, Irish broker Davy says today.
PokerStars is the world's biggest online poker group.
The massive payout was to settle the government's legal charges that PokerStars had evaded gambling restrictions in the US fraudulently.
The latest agreement also sees PokerStars buy rival US website Full Tilt Poker, which went under after the US authorities shut down American operations of the major online poker companies last year.
PokerStars agreed to forfeit $547 million to the US and pay $184 million owed to foreign players by Full Tilt.
Domestic victims (USA) of Full Tilt will be able to seek compensation from the $547 million, it emerged.
"At first glance, the implications of this agreement appear to be negative for bwin.party," said Davy analyst David Jennings, who highlighted that poker accounted for a quarter of bwin.party's revenues.
Jennings points out that it may lead to a competitor of bwin,party returning to the European market.
"Pokerstars says it intends to re-launch Full Tilt Poker within 90 days," he said.
"With PokerStars' marketing budget behind it, it may well be able to resuscitate the severely damaged Full Tilt brand, bringing a fresh competitor back to the European poker market."
He also pointed out: "Secondly, with this agreement in place, Pokerstars' European licences now appear to be completely safe.
"Any hope that bwin.party investors may have had that some day its European licences could be impacted by a prosecution in the US will now fade.
"Combined, these two factors mean that the poker revenue line at bwin.party is likely to remain in a state of structural decline."
Jennings said he had already downgraded its forecast for poker revenues at the firm by 11.7 per cent this year and by 5 per cent in 2013.
There has been a threat to online gambling firms since 2006, when laws came in which stopped banks passing funds to gambling sites.