Enlarge imageBy Pete Harrison
LONDON (Reuters) - Shares in online casino group PartyGaming
The over-subscribed offer values PartyGaming higher than many household names such as British Airways
PartyGaming priced its initial public offering at 116 pence per share, giving a market value of 4.6 billion pounds and guaranteeing a place in the FTSE-100 index of blue-chip UK companies.
The stock traded as high as 132-1/2p before closing 11 percent higher at 129p.
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Existing shareholders sold a 20.6 percent stake in the offering, which raised no money for the company itself.
Major beneficiaries include Anurag Dikshit, the group’s 34-year-old founder and operations director, who reduced his stake from around 40 percent to 32 percent, as well as other senior managers and staff.
Chief Executive Richard Segal told Reuters the group would target Europe and Australia as its main areas for growth, with Asia a "medium-plus-term" target.
RED HOT POKER
"The reason why we’re poker focused is that the group has had extraordinary success there ... as a result of that, our other products, casino and bingo, have been to a degree neglected," he said in a telephone interview.
"We will now be driving those businesses hard going forward, and at the same time we have got plans to introduce new products starting next year," added Segal, himself a keen poker player.
The pricing was just below the midpoint of PartyGaming’s indicative range of 111 pence to 127 pence, and according to Segal the offer was more than three-times covered.
PartyGaming, formed in 1997, runs three main brands -- PartyPoker, StarluckCasino and PartyBingo -- and now has more than half the global online poker market.
Poker has become a big money-spinner for Internet gambling companies, which estimate the world Internet gambling market between $7 billion and $12 billion per year and with 20 percent annual growth.
The Gibraltar-licensed group has endured a bumpy ride to flotation, dogged by fears that it could lose its main market as the United States seeks to crack down on Internet gambling.
PartyGaming’s prospectus warned its directors risk jail if they travel to the United States, but industry analysts said the threat of legal action from the Justice Department was minimal.
"We had a marketing director there a couple of weeks ago, and it is not going to restrict my travel to the U.S.," said Segal.
Analyst Greg Feehely at Altium Securities said there was minimal risk that online gambling would be banned.
"We’ve seen some anti-measure introduced every year for the past six years, not one of which has been a success," he said.
But Henk Potts, investment manager at Barclays Stockbrokers, called the risk "considerable".
"There will always be this black cloud hanging over them when more than 80 percent of their customers are potentially breaking the law by using their services," he added.
Analysts said that PartyGaming was trading at around 13 times earnings, a significant discount to rival Sportingbet
Founder Dikshit is set to gain around $720 million from the flotation, while co-founder Vikrant Bhargava, 32, PartyGaming’s marketing director is set to earn around $200 million.
Two other major shareholders, former porn entrepreneur Ruth Parasol and her husband Russ de Leon, will net around $370 million each.
The offer consists of 781.6 million existing PartyGaming ordinary shares, prior to the exercise of an over-allotment option of up to 115.3 million shares.
Dresdner Kleinwort Wasserstein is acting as sponsor, sole global co-ordinator and bookrunner.
