PartyGaming dismisses Empire's threat to sue as takeover talks fail |
November 22, 2005 - The Guardian - Empire Online, the internet poker firm whose shares have slumped almost 60% below June's flotation price, announced yesterday the collapse of its second set of takeover talks in three months.
Empire, led by Noam Lanir - a 38-year-old Israeli entrepreneur once known "the king of Tel Aviv's nightclubs" - immediately vowed to sue PartyGaming, its latest potential suitor to walk away. The legal action relates not to the failed takeover talks but to the alleged damage done to Empire by PartyGaming's switch to a two-tier operating platform last month.
Empire is a so-called "skin" company, which recruits online gamblers who then play on PartyGaming's Party Poker site. In exchange, Empire earns a commission from revenues generated by the players.
However, Party Poker switched all its own directly recruited players to an upgraded platform last month, leaving all "skin" players to play among themselves. Many of Empire's most active players - what it calls its "professionals" - immediately re-registered with Party Poker, prompting Empire to warn of a shortfall in commissions.
The contract between the two companies dates from 2002. Empire said: "Having received legal advice, the directors intend to institute and vigorously pursue legal proceedings as soon as possible."
PartyGaming dismissed the threat in the strongest possible terms. "They are clutching at straws," said a spokesman. "To the extent that any action is forthcoming, PartyGaming is highly confident of a successful outcome."
Empire, which is based in the British Virgin Islands, declined to say where it intended to sue the Gibraltar-based PartyGaming. However, its own flotation prospectus hinted at the difficulty that online gambling companies face in resolving legal disputes quickly, given the industry's preference for operating from off-shore tax havens.
Page 31 of Empire's prospectus stated: "Should the agreement with WPC Productions [the relevant PartyGaming subsidiary] ... be breached by them, the company would have to sue such parties in the courts of the British Virgin Islands and to enforce any resulting judgment in Gibraltar ... without any guarantee that any such action would be successful."
Empire, whose first set of failed takeover talks were with Sportingbet, also launched a bitter attack on the way PartyGaming conducted its due diligence (the process of checking a target's business and books). Empire complained of PartyGaming's "continued delays".
The firm's chief complaint, however, was that the initial approach was supposedly an all-share proposal worth about 130p, or almost £400m. However, Empire said that what had materialised was "significantly different both in terms of the price and the structure."
PartyGaming revealed that its final proposal, which would have been subject to more due diligence, was to acquire only "the assets and business" of Empire for the equivalent of 60p a share, or about £175m. The implication of Party's statement was that it submitted no plan to buy Empire, the quoted corporate entity.
Empire's shares, after initially falling, recovered to show a gain of 9% to 69p on the day. That was helped by Empire's confidence in its current trading - it said it was likely to achieve market forecasts for its profits this year and in 2006. |
> Read the full story here
Source: Guardian.co.uk |
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