Garber Sees Industry M&A beyond the DOJ

30 January 2008

As ever the subject of discussion, the U.S. Justice Department's negotiations with London-listed PartyGaming remained a salient issue today among investors, analysts and the media as the group unveiled KPIs for the fourth quarter.

"We feel that discussions are going well, we feel that they will end well, and I would be extremely surprised and disappointed if they didn't end in 2008," remarked Party Chief Executive Mitch Garber during a conference call with analysts and investors this morning.

On the back of a 52 percent jump in revenue against Q4 2006, as well as a 156 percent bump in casino revenue compared to the same period, Party shares shed 2.50p, or 8.77 percent, to close at 26.00.

Garber said that uncertainty in the eyes of shareholders, especially concerning Party's negotiations with the DOJ, has put "a downward pressure" on stock value, and that the effects -- the resultant stubbornness in share gains -- would be "something we'll have to live with in the near-term."

"It would be surprising to me," Garber said, "if we came to an acceptable, reasonable deal with the DOJ, if the stock did not react favorably to the fact that the company has been so responsible in so many jurisdictions -- including the United States -- and that it put the United States legacy issue behind it."

But what of the current share price, down an estimated 75 percent against its closing price of 107p on Sept. 29, 2006?

"In my view, we're getting mostly fair value for where we're at today," Garber said, "with a discount to the Department of Justice negotiations -- which, in my view, if I had to be perfectly frank, I think it's acceptable to have that discount pending the outcome of the DOJ negotiations."

On a brighter note, the company indicated that during the first four weeks of January, average gross daily poker revenue totaled $1.02 million, exceeding the $1 million-mark for the first time since the UIGEA was enacted in October 2006.

Looking beyond its negotiations with the DOJ, Garber suggested that it would be "natural" to consider PartyGaming an attractive consolidation target, but stressed that the company had neither firm nor imminent plans to become one.

He suggested moreover that once the "DOJ situation" was cleared away from Party and other major firms like 888, an "active M&A environment" would very likely emerge.

"I think it's a natural thought that a company that has no skeletons, that has no legacy issues, that has been run properly and professionally, should be seen as part of a consolidation dance," said Garber.

"Whether it ends in consolidation or not, I think that, quite frankly, we're the prettiest girl at the dance."

Click here to view fourth-quarter key performance indicators from PartyGaming.

Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.