888.com aims to hit $1.3bn jackpot with IPO

Tuesday, Aug 23, 2005

888.com, the world's largest internet casino operator in terms of numbers of visitors, aims to launch an initial public offering in London next Thursday that is expected to value the group at more than GBP700m ($1.3bn).

An IPO would generate a substantial windfall for the two Israeli families that control 90 per cent of the company. Avi and Aharon Shaked own about 70 per cent while the Ben-Yitzhak family owns about 20 per cent.

People close to the plans say 888.com is working towards a September 1 launch date for the IPO. If it succeeds, it will become the latest high-profile online gaming float, following PartyGaming and Empire Online.

888.com operates the Casino-on-Net, Reef Club Casino and Pacific Poker brands and has 20m registered member accounts in more than 150 countries.

Like PartyGaming, 888.com is based in Gibraltar. However, unlike PartyGaming, which generates about 90 per cent of its revenues from online poker, two-thirds of 888.com's revenues comes from casino games such as blackjack and roulette.

Analysts estimate that 888.com generates annual profits of about GBP100m. HSBC is sole bookrunner on the IPO. Panmure, Bridgewell and Numis Securities are co-lead managers. Credit Suisse was originally involved in the float but is understood to have decided not to underwrite the IPO because of concerns about possible regulatory action in the US, wherethe legality of online gaming is unclear. Despite the threat of action in the US, the world's largest online gaming market, internet gaming stocks have confounded critics.

PartyGaming shares fell 5p on Tuesday to 168lp but they have risen more than 45 per cent since its June IPO. At Tuesday's closing share price the company had a market capitalisation of GBP6.7bn, more than retail groups Marks and Spencer and Kingfisher, and airports operator BAA.

Shares in Empire Online, which sends punters to sites such as PartyGaming, have risen more than 36 per cent since the group floated on Aim in June.

888.com is run by John Anderson, a former Ladbrokes director, who said in a recent interview with the Financial Times that the group was sure of its legal position regarding trading in the US.

"What I'm doing is not illegal," he said. "I'm taking bets from people in the US through my server in Gibraltar."

Matthew Garrahan in London