Details of the Party/Empire Settlement

15 February 2006

The dust has settled on the relatively short, but heated court case between PartyGaming and Empire Online.

Poker colossus PartyGaming and competitor Empire Online have reached a settlement through which all assets relating to Empire's poker brand, Empire Poker, as well as Starluck Casino and Ace Club Casino, will be handed over to PartyGaming for US$250 million (£145 million).

Empire filed the suit in December, claiming breach of contract after PartyGaming ring fenced its poker players from those of its four skin clients, including Empire Poker.

Buzz about a PartyGaming takeover of Empire began to swarm last fall, and it is speculated that PartyGaming was planning to buy Empire Poker all along. Some media have reported that Party Gaming began bid proceedings last year, but the talks ended up fruitless.

While there is some truth in that, John Shepherd, PartyGaming's director of corporate communications, wanted to address the media speculation.

"We had preliminary discussions with them last fall, but we never made a formal bid," Shepherd said. "We tabled a proposal to take out some of their assets at a certain price--60p per share, which was the prevailing price share then. Finally we've reached an agreement to take out Empire Poker and the agreements that were in place with Starluck and Ace Club for $250 million."

Other media have reported that it wasn't until three weeks ago that PartyGaming took Empire's lawsuit seriously. The company was reported to have said that Empire CEO Noam Lanir was "clutching at straws" in an attempt to bring the case to court. But Shepherd wanted the record to show that it wasn't true.

"We've always taken this seriously," he said. "We've always been confident of reaching a successful outcome, which we have."

Empire may have lost its namesake poker room, but in exchange it now has a quarter-of-a-billion dollars to spend, and a bankroll like that could buy a lot of poker rooms.

Further, Empire is not completely without a gaming business; it still has two thriving gaming platforms, Noble Poker and Club Dice Casino, and it reported positive results in the fourth quarter of 2005, due in part to the success of these sites.

Lanir called the legal battle a "tough-but-necessary period in our development." "We did not give up, and we emerged stronger," he added. "We anticipate $37 million in profit this year from our existing business. The PartyGaming settlement will help support our efforts to enter into the European and Far Eastern Markets."

The settlement could be mutually beneficial. Empire is unloading a troublesome poker site that was rendered useless when PartyGaming's successful subversion kept Empire at a distance from its customers, and PartyGaming is already an industry sweetheart. Adding a poker room and two casinos, Starluck and Ace Club, can't hurt its books or its customer base.

PartyGaming already owned Starluck Casino, which had an affiliate agreement with Empire while it was a skin, and Ace Club Casino was a white-label business that went through Empire. PartyGaming's purchase of Empire Poker, therefore, puts an end to Party's white-label business.

"This deal is consistent with our skin strategy, and it consolidates our strong position in online poker," Shepherd said. "It increases our poker presence outside the United States as much as we've bee expanding our player base outside the U.S., so too has Empire Poker. Also in the future we can focus on cross-selling opportunities. . . . We've obviously had the success through blackjack crossover that was not available on Empire Poker. It will also enhance our earnings. And of course it brings an end to the legal proceedings."

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.