What price peace of mind for Party?

The news of a possible settlement between PartyGaming founder Anurag Dikshit and the US authorities in relation to the poker operator’s activities in the US prior to the US internet gambling ban of 2006 will come as a relief for investors and those looking at the possibility of some major merger and acquisition activity next year.

It is understood that Dikshit found the pressure too much to bear over the past two years and wanted to be able to carry out his business and charity work in India with a clear mind.

But what of PartyGaming, how much will the company end up paying as settlement to the US authorities? The US authorities are looking to get between 50% and 100% of the profits retained by the company now. Party currently has US$150m on its balance sheet and industry observers estimate that the amount of the financial penalty will be between U$50m and US$100m.

Analysts at Deutsche Bank said the latest “developments should be taken positively for PartyGaming (and other operators in discussions with the DoJ)”, as it showed the DoJ was willing to reach settlements while investors now had a clear idea of the financial implications [“‘significantly lower’ than $300m =c.48p/share”] of dealing with the firm.

Analysts at Daniel Stewart said: “Critically, the independence of talks should ensure that a settlement can be made.” Certainly, the tone of the firm’s statement this morning was much clearer as to the likelihood of a settlement with the US authorities. It said: “The Company's discussions with the DoJ have made good progress and it is currently negotiating the final terms of a possible settlement with the DoJ.”

Adding the usual caveat that “no guarantee that an agreement will be reached between the Company and the DoJ”, such a statement will be viewed optimistically by the online gaming sector and a settlement announcement in the first quarter of 2009 may well be on the cards.

With potential regulation of online gaming in the US in the offing, there is a possibility that the first half of next year will mark the start of the long-awaited consolidation investors and the industry have been waiting for for so long.