Empire Online to Sue PartyGaming

Online gaming company, Empire Online, operator of Empire Poker, announced today that it will be taking legal action against rival and former partner, PartyGaming. The announcement comes on the heels of the breakdown of talks between the two companies on a potential deal that would have resulted in PartyGaming purchasing Empire Online.

According to a statement released by Empire, PartyGaming, operator of internet poker behemoth, Party Poker, approached it with an all-stock offer valuing the company at 10 percent of the total value of the combined entity. The discussions ended because, according to the statement:

“Following a protracted due diligence process and continued delays in the timetable, PartyGaming has made a revised proposal that is significantly different both in terms of the price and structure and at a level that cannot be recommended.”

The legal action that Empire intends to take stems from the perceived damage inflicted on the company as a result fencing off its former “skins,” of which Empire was one, from its poker network. Empire served as a conduit for new players to join the Party platform. Party built a huge player base, while Empire received a piece of revenue its players brought in. Now that PartyGaming has cut off the skins, Empire’s player base has shriveled, potential new players may very well be staying away, opting for a larger network, and the company has already warned analysts that its financial results will be lower than previously expected.

PartyGaming purchased Multi Poker, one of the other three skins, and has made Intertops Poker an affiliate, essentially absorbing that poker room, as well. The fourth skin, Coral Eurobet will be migrating to another poker network, with PartyGaming’s assistance.

PartyGaming said the rejected bid valued Empire Online at 60p per share, whereas initial reports in the media said an informal all-share proposal was made last month of more than twice that.

This is not the first time talks have ended between Empire and a potential suitor. In September, Sportingbet closed talks that had it potentially bidding 270p per share for Empire.

After closing previous day’s trading at 65p, Empire Online’s shares opened at 57.5p Monday, and fell as low as 52p, but closed up slightly at 65.9p. The company’s stock has been as high as 288p in the last 52 weeks.

Originally published November 21, 2005