It had always been a question of “when” and not “if”. And the when has arrived. PartyGaming has reached a non-prosecution agreement with the U.S. Attorney’s Office (USAO).
As a part of the deal, PartyGaming has irrefutably agreed that it had offered real money online gambling services to players in the United States from 1997 to October 2006, when it withdrew from the American market. PartyGaming has also agreed that transactions from American customers intended for PartyGaming were processed by third parties, which was also against the law. PartyGaming has also agreed not to enter the American online gambling market under current legislation.
For these violations PartyGaming will pay $105 million over a three and a half year period from now till September 30th 2012. On its part the USAO will not prosecute PartyGaming or any of its subsidiaries, including PartyPoker and PartyCasino for the aforesaid violations. Nick Batram of KBC Peel Hunt opined that the deal was a good one for PartyGaming. His organization had expected the fine to be around $150 million.
Commenting on the deal, Jim Ryan the CEO of PartyGaming, said, “The resolution of our position with the U. S. authorities marks an important day for PartyGaming. It has been a long and complex process, but we have reached an amicable solution with the USAO that makes commercial sense for our business and is in the best interests of shareholders.
We are now well-placed to seize organic as well as strategic opportunities that previously were beyond our reach.” The strategic opportunities referred to by Ryan are possible merger and acquisition deals. Companies in the online gaming sector need to consolidate in order to cut costs and remain competitive. But with the U.S. liability pending no one would have touched PartyGaming. That the agreement was in the best interest of the shareholders can be judged from the 13% increase in stock price. The shareholders of PartyGaming’s competitors were also joyous.
The stock of 888 rose by 8% and that of Sporting Bet rose 10%. These two companies are also in negotiation with the USAO and their agreements could be making the news any time now.
Industry experts now feel that PartyGaming co-founder, Anurag Dikshit, panicked and gave in to the USAO, when he settled with them in December 2008. Had he held on he would have got a better deal. Dikshit will be paying $300 million, almost three times than PartyGaming. Also when his sentencing will come up next year he faces a jail term, while PartyGaming got a non-prosecution agreement.
