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Bwin in talks to acquire rival gaming group Sportingbet 08/03/2007
David Teather Thursday March 8, 2007

There was a fresh wave of consolidation in the gaming industry yesterday as online betting firm Sportingbet received a takeover approach from Austrian outfit Bwin and the owner of Littlewood's Pools said it would buy its biggest rival Vernons.

In a brief statement Bwin said the talks with Sportingbet were at a "very preliminary stage" and "may or may not lead to an offer". The online gaming industry is seeking to rebuild revenues after internet betting was banned in the United States last year.

The pools business has suffered a slower and longer term decline since the arrival of the National Lottery in 1994 and more recently the proliferation of online gaming in Britain.

Sportech, which bought Littlewoods Pools in 2000, said it had entered exclusive talks with Ladbrokes about the acquisition of its Vernons Pools business. Littlewoods has around 500,000 people playing a week, the majority of whom still buy their coupons on the doorstep from a network of collectors. Vernons, which only operates via the internet, over the phone or by direct debit has around 200,000 players. Sportech chief Ian Penrose said Littlewoods Pools peaked at 8 million players and Vernons at 2 million, "at just about the week before the National Lottery began".

The US ban hit Sportingbet hard. In December the company recorded a charge of £252m for withdrawing from the market, pushing it into losses of £241m in its financial first quarter.

The company's shares peaked at 451p last summer but fell precipitously after the Washington ban. They were 17% higher yesterday, closing at 60p and valuing the business at £222m. French authorities last week called in executives from 20 gaming companies to discuss the legality of their operations .

A large part of the European Union continues to protect local state-run gambling monopolies. The industry has seen a flurry of mergers and takeovers.

Ladbrokes is in discussions to acquire the online gaming business 888 Holdings. Partygaming also held talks with 888 but went on to buy Empire Online for £40m.

Littlewoods Pools was established more than 80 years ago when the late John Moores printed off 4,000 coupons and handed them to fans outside Old Trafford before a Manchester United match. Sportech bought the business for £160m and has the rights to use the Littlewoods name until 2010. The number of players had declined by 15-20% a year, although a new management team last year got that down to less than 10%, Mr Penrose said.