Empire Online: Company With No Clients?

Published: Thursday, September 22, 2005 Online-Casinos.com

EMPIRE ONLINE - A MARKETING COMPANY WITH NO CLIENTS?

Sportingbet customers had their doubts....

Sportingbet's reverse out of the takeover talks with Empire Online may have had it's genesis in customer fears that Empire ONline does not actually have any customers - and the end of talks led to a share price plunge of 20 percent.

Sportingbet ended discussions to buy Empire Online for GBP 790 million amid concern in the City that the targeted company does not actually have any customers. And Sportingbet execs failed to deny speculation that the poker websites Empire Online runs under the aegis of PartyGaming and 888 Holdings meant it was essentially a marketing team without a customer base.

Fears that Empire Online could be much less valuable than previously thought after the emergence of the "customer issue" sent the company's shares plunging 20 per cent. Paul Leyland, an analyst at Seymour Pierce, said: "All that was being offered was about 16 personnel and a marketing war with Party and Cassava (now known as 888). Empire offers an excellent marketing team, but it does not control its own customers."

An analyst at Daniel Stewart & Co, the UK broker, said that the lack of customers meant that Sportingbet would have been buying a revenue stream that was largely controlled by other gambling companies.

One of Empire's main lines of revenue is empirepoker.com, a website that is technically a subsidiary of PartyGaming. PartyGaming actually runs the website for Empire, which does not have a gaming platform. It takes a percentage of the poker "pot" - known as a "rake" and typically between 1 per cent and 5 per cent of the amount wagered - passing a portion of this on to Empire.

Although "ownership" of the customers is a grey area, analysts agree that they belong more to PartyGaming and 888 than to Empire. At the same time, because PartyGaming holds all the customer information relating to the empirepoker.com website, any potential purchaser of the operation would probably need to talk to both companies.

Analysts expect PartyGaming itself eventually to buy Empire Online, for a much lower price than Sportingbet was considering. PartyGaming would not comment on the potential acquisition yesterday.

Sportingbet said: "On September 5, the board of Sportingbet confirmed that it was in discussions with Empire which might or might not have led to an offer and that discussions were at a very preliminary stage. Sportingbet can now confirm that, by mutual agreement, it has ceased discussions with Empire in respect of the potential offer."

Sportingbet's shares fell 17p to 326.5p, while Empire stock lost 52p to close at 202p.