Internet casino firm 888 plans $500 mil. IPO

Elisa Martinuzzi

Thursday, Sept. 1, 2005 | 9:31 a.m.

888 Holdings Plc, the world's largest Internet casino operator by number of visitors, plans to sell about $500 million of stock in an initial public offering as its owners cut their stakes and tap demand for online gambling companies.

The casino and poker gaming company has hired HSBC Holdings Plc to manage the sale, 888 said today. The Gibraltar-based company may be valued at about $1.5 billion when it sells shares in London this month, bankers said.

The online gaming industry may double revenue to $24 billion in 2010, from $12 billion this year, 888 estimated, citing gaming consultancy Christiansen Capital Advisers LLC. Investors are betting that growth will outweigh regulatory concerns in the United States, where the Justice Department considers online gambling illegal.

"It is unlikely that the U.S. will be able to stop people from gambling," said Julian Easthope, analyst at UBS AG in London, who advises investors to buy stock of rival PartyGaming Plc.

Shares of PartyGaming have gained 36 percent since its IPO in June through Wednesday's close, valuing the company at 6.3 billion pounds ($11.4 billion).

888, which said it may use its listed stock to pay for acquisitions, reported a 30 percent gain in first-half profit to $24.5 million. Revenue rose 48 percent to $123.7 million.

The company seeks "to become the market leader in the global online gaming entertainment industry," Chief Executive John Anderson said in a phone interview. The IPO will "increase further our brand profile, recognition and credibility."

Marketing and advertising 888's brand cost the company $51 million in the first six months of the year, said Anderson. Founded in 1997, 888 operates the Casino-on-Net and PacificPoker Web sites. Casino business accounts for about two-thirds of 888's sales.

Anderson plans to reduce the company's reliance on the U.S., which accounts for about 55 percent of sales, to concentrate on Europe and the Far East.

"No one country should account for more than half of our sales," he said.

The company, which has never made an acquisition, is also seeking takeovers, said Anderson, without giving details. The online gaming industry will consolidate from more than 1,000 global players to less than 100 over the next five to six years, he added.

888 founders, brothers Avi and Aaron Shaked, have a combined stake of 70 percent, and a family trust controlled by Shay and Ron Ben-Yitzhak holds about 20 percent. Employees of the company own the rest.

CEO Anderson, former property director at Ladbroke Plc, now Hilton Group Plc, said he will receive about 1 percent of 888's shares at the time of the IPO, part of which he may sell.

Shares go on sale to money managers around mid-September and the offering runs until the end of the month, bankers said.