888 results 'make us more appealing' to Ladbrokes
The chief executive of 888 has insisted that a takeover from Ladbrokes remains on the cards and that the internet gaming company's most recent figures "only make us more appealing".
888 issued an upbeat fourth-quarter trading statement, with operating income rising 18pc
By Alistair Osborne 6:45AM GMT 08 Feb 2011
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Gigi Levy dismissed a recent report that discussions had broken down with the bookmaker, adding: "The talks are ongoing. It's a big deal for everybody."
Ladbrokes approached 888 with a £240m takeover proposal pitched at around 70p a share, as revealed by The Telegraph in December.
Mr Levy would not be drawn on any "stumbling blocks" between the two companies, saying only: "These are negotiations like any other negotiations between two companies. They take time."
His comments came as 888 issued an upbeat fourth-quarter trading statement, with operating income rising 18pc to $71m (£44m) compared with the previous three months. 888 shares rose 0.75 to 44.5p.
However, 888 added a twist to the takeover discussions by disclosing that the performance of Wink Bingo, acquired in December 2009, was so far ahead of expectations that the earn-out may need to be renegotiated. 888 said the payment would be "at the upper end of the earn-out range", adding it was in advanced discussions "with the Wink Bingo vendors in relation to the structure and timing of such a payment to ensure that the group meets its obligations".
Nick Batram, an analyst at Peel Hunt, said the earn-out payment "could be as much as £48m cash and compares with the group's current gross cash position of $67m.
"We believe that the most likely outcome is a restructuring of the earn-out as opposed to an equity fund raising. Either way it is another factor that suggests 888 is not in a position of strength when negotiating a sale of the business," said Mr Batram, who has a "sell" recommendation on 888.
Total operating income for 2010 rose 6pc to $262m, lifted on a pro-forma basis by a 23pc like-for-like increase from bingo to $50m. Casino income fell 1pc to $117m, while poker was 26pc down at $38m.
Ivor Jones, an analyst at Numis, continues to see logic in a takeover by Ladbrokes. "We believe there is a good fit between the two businesses and that both sets of shareholders should be supportive of a deal," he said.
Ladbrokes declined to comment.
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