Is it a coincidence that on Valentine's day two of Australia's online gaming darlings have announced a merger?
"I guess you could say we got married on Valentines day," said Lasseters Holdings Managing Director Peter Bridge in reference to his company's coming together with Gocorp Limited.
The merger will see Australia's first regulated online casino, Lasseters Online, and publicly held company Gocorp Limited forming an interactive gaming giant based in Australia.
The move keeps Gocorp active in the online gaming industry. The company shut down its virtual casino, AusVegas.com, in December in response to the Australian government’s Interactive Gambling Moratorium Bill.
Lasseters Holdings Limited will hold 75 percent of the equity in the merged entity while current shareholders will hold the remaining 25 percent.
Gocorp will acquire 100 percent of the equity in Lasseters Online (a division of Lasseters Holdings) and in return, issue three shares in the merged entity for every one share in Gocorp.
The new company will take a global approach to the online gaming industry with the help of a nearly 100,000 global player base from Lasseters and over $5million in cash from Gocorp. The joint company will also be able to take advantage of licenses that can be utilized in overseas jurisdictions.
"By adding Gocorp’s player base to Lasseter’s database of 95,000, the merged entity will achieve a critical mass that will continue to lower the cost of service delivery," said Bridge. "These two factors are critical for strengthening the business international competitiveness and generating value for shareholders."
Like any good marriage, this one didn’t happen overnight. Bridge said the agreement had been long discussed between the two gaming entities, but the conversation didn’t get serious until the last couple of weeks.
"They have good technology that made them attractive to us," he said. "We have a very good database which made us attractive to them."
The moratorium bill forced Gocorp to shut down because the company feared there were too many loopholes in the bill and that it was safer to shut down than to try to comply.
Lasseters Online chose to stay open and scaled back some of its operations to what they were prior to the law's enactment. The company continued to offer real-money gaming on the same terms of trade prior to May 19, 2000. The site offers 11 casino-style games and associated services to international markets and players located within its parent company’s physical gaming license area in the southern region of the Northern Territory.
Although Lasseters remained open, it was unable to keep the pace of other online casinos, which were based outside of Australia and not effected by the law. Bridge said the developments did play a role in the merger.
"This allows our investors to continue to invest in online gaming," said Bridge. "Business had slowed since the Moratorium and this will certainly allow us to change our focus to more global plans instead of just Australia."
Bridge said the merged entity will benefit from the unique flexibility of holding online gaming licenses issued by the Northern Territory, Queensland and potentially Tasmanian governments.
"We will have a fully developed, proven operating system that can be taken to any jurisdiction should that be required," he said.
Bridge says that when the Moratorium is lifted, which should occur in May, the combined company will look to keep its stronghold on Australia.
"We will look at global expansion immediately," he said. "Our post-moratorium efforts will focus on bringing new types of games to the Australian market."
In a statement made to the Australian Stock Exchange, Gocorp explained its reasons for the deal: "The merged entities retain multiple licenses and cash reserves and the ability to drive forward Gocorp’s strategic alliances and capitalize on domestic and international gaming opportunities."
Gocorp Chief Executive Officer Paul Appleby said his company wanted to keep its presence in the online gaming industry and had little choice but to merge with Lasseters.
"Gocorp has always remained committed to responsible and regulated online gaming," he said. "The federal government's moratorium halted our operations. I believe a merger with Lasseters Online will lead to the creation of a stronger entity capable of growth and ultimately leadership status," Appleby said.
Bridge says the new company will have a leg up on other technology startups in trying to assume a global leadership role.
"The merged entity will have a strong track record for growth, a broad global player base and a growing revenue stream," he said. "It will not carry the risk associated with a startup technology company." In addition to joining forces with a database and money, the new company will also be able to cut costs on many fronts. The core gaming operations will continue to be based in Lasseters’ Alice Springs and potentially also Gocorp’s Gold Coast facilities.
The cost-saving measures arise in shared software and gaming technology, customer care operations, marketing and administrative support. Lasseters Online (www.lasseters.com.au) was launched in April 1999 and is regulated by the Northern Territory Government. In the 1999-2000 financial year, the business generated revenue of $5.4 million based on turnover of over $100 million. In the six months to December 2000, Lasseters achieved turnover of more than $130 million and gaming revenues in excess of $7 million. The site consistently ranks as one of the most popular online casinos in the world.
While Lasseters was the first regulated online casino, Gocorp was the first pure online entertainment company awarded an interactive gambling license under Queensland’s Interactive Gambling Act of 1998.
According to Bridge, Lasseters will interview Gocorp’s current staff with a view to recruiting those who offer complementary technological and administrative expertise to the Lasseters Online team.
Lasseters Holdings' land-based assets, including the Lasseters Hotel Casino and the soon-to-be-developed Alice Springs Convention Center, will remain part of a separate, privately owned enterprise.
Gocorp’s wholly owned subsidiary specializing in gaming software development, Spincycle, will remain an operating division of the merged entity.
Bridge will be the managing director of the merged entity while retaining the same position with Lasseters Holdings.
Lasseters will appoint six directors to join three of the existing Gocorp's directors.
The merger is subject to the approval of Gocorp shareholders at an extraordinary general meeting in late March 2001 and other preconditions listed in the binding heads of agreement. Gocorp shareholders will also vote on a proposal to rename the listed entity and options for the name are now being considered.