[Sniper]

PartyGaming rubs salt in Empire's wounds
By Martin Dickson
Published: November 4 2005 02:00 | Last updated: November 4 2005 02:00

Empire Online's life as a quoted company looks set to be almost Hobbesian: nasty, brutish and short.

The online gambling "skin" company, which delivers punters to gaming operators' sites in return for a share of the "rake", or percentage of the bet taken by the operator, floated in June with an issue price of 175p a share. It saw an indicative 270p a share approach from Sportingbet come to nothing in September; and faced a share-price collapse last month after PartyGaming decided to move all its own poker players to a new operating platform.

Yesterday's news of a preliminary approach from PartyGaming left Empire's share price down 2p at 113½p. This reflected some uncertainty about whether a deal will take place and considerable certainty that if it does occur it will be well below the flotation price.

PartyGaming's statement yesterday included a caveat about Empire's business prospects. Coming from a group whose decision to change the rules has done so much to curtail those prospects, this reads like rubbing salt in Empire's wounds.

There must be a question whether Empire's shareholders would have done better if there had been a full-blown auction in the light of Sportingbet's interest. But the risks to Empire's business model from being substantially dependent on a platform owned by a significantly larger rival would surely have become apparent through any competitive sale process and would have been priced into any offer that resulted.

Yet both sides could still gain from a deal. Empire would be part of a much larger group with what should be a less structurally flawed plan, while PartyGaming would get Empire's expertise at bringing in new gamblers and would also benefit from being less reliant on the US.

Whatever the possible upside, however, the story of Empire is a reminder that the volatility of the online gaming sector is best enjoyed as a spectator sport.