Tough Payout For Sportingbet

Published: Monday, November 06, 2006 Online-Casinos.com

TOUGH PAYOUT FOR SPORTINGBET

A deal's a deal, but this obligation comes at a bad time

A deal clinched back in 2004 came back to haunt Sportingbet this week, but the gambling group rose to their obligations despite the additional stress the group has recently undergone due to the US restrictions on financial transactions to online gambling sites.

Sportingbet bought Paradise Poker for $297.5 million in October 2004 (GBP169 million at the time) and said it would make additional payments to Bonaire Investments based on the achievement of certain performance targets. This week the company paid $33.3 million (GBP 17.6 million) to the former owners of Paradise Poker after reaching the agreed targets, despite having closed the site to US gamblers following the enactment of the US Unlawful Internet Gambling Enforcement Act.

The company has announced that it will take an estimated one-off hit of GBP210 million in the year to July 2007as the cost of reversing out of the American market. Paradise Poker will now roll out multi-language and multi-currency sites to boost its presence in the European market.

Sportingbet said Paradise Poker had met targets of generating $150 million of operating profit since its acquisition two years ago. As a result it has paid $33.3m and over 9.7 million shares to Bonaire Investments.

In addition, Bonaire will be entitled to 10 percent of cumulative operating profits of the Paradise Poker business in excess of $150 million for three years after completion. It said this consideration would be paid in cash in late 2007 and represents the final payment due to Bonaire under the agreement. Bonaire will now hold an 11.47percent stake in Sportingbet.

Sportingbet said alongside its full-year results last month that the number of active customers at Paradise Poker was up 63percent to 345 575 over the previous year. However, only 19 percent of the rake came from gamblers outside the US.