Betcorp Ceases US Operations, in Talks to Sell

16-Oct-2006, 08:27

Australian online gaming company Betcorp Ltd. has suspended its U.S. operations and is in sale talks with a number of parties after the United States moved to prohibit online gambling earlier this month.

Betcorp's shares, which have fallen more than 70% since the law was passed by the U.S. Congress, fell 12.2% to A$0.395 on Monday, giving the company a market value of about A$8.4 million.

Analysts said interest in Betcorp's business was likely to be limited, with any potential buyer likely to be based overseas. Since the U.S. bill was passed at the end of September more than $7 billion has been wiped off the market value of Britain's online gaming companies.

Betcorp derived about four fifths of its revenues from U.S. residents.

'The board is continuing discussions with a number of unconnected parties who have expressed interest in the acquisition of the group's gaming operations and infrastructure,' said Betcorp, adding it continued to trade with residents of 87 other countries.

'There is no certainty that such discussions will lead to a sale, or on what financial terms such a sale might take place,' it said in a statement to the Australian Stock Exchange.

The company said it planned to cut its staff by around a third and it expected to make a further announcement in the next 10 days.

Mitch Garber, chief executive of PartyGaming Plc., told the FT that his firm was interested in buying companies impacted by the new U.S. legislation.

Private investors are also considered likely buyers.

Betcorp's domestic fellow online casino operator Lasseters Corp. Ltd. also said it was no longer offering services to the U.S. market, but would stay in the remaining online global gaming market.

Lasseters said the U.S. decision had eliminated about half of the world's estimated US$10 billion online gaming industry. It said it entered the U.S. market eight years ago and it accounted for about 70 percent of its annual revenue.

Lasseters said its fiscal 2007 result would be hurt by the decline in revenue, costs from improving its competitiveness and diversifying its services and subsequent write-downs.

'While the short to medium term impact is significant, the board continues to seek out new markets to mitigate the effect,' Lasseters Managing Director Peter Bridge said in a statement. Changes planned by the company include launching an online sports betting operation.

Lasseters' thinly traded shares were steady at A$0.043.