After GigaMedia Ltd. announced it was in talks over a possible merger or sale late last month, The Sunday Times of London reported PartyGaming and the Taiwan operator are "holding talks on a deal."
When GigaMedia said it was in discussions with "several interested parties," it neither specified with whom, nor which of its two arms -- Asia-facing online gaming, Everest-branded real-money gambling, or both -- was on the block.
In a note to clients Monday, Todd Eilers, an analyst with Roth Capital Partners in California, suggested the company has designs on selling its Everest stable -- poker, casino and sports betting -- and building out its Asian business.
The Asian business consists of FunTown, a casual gaming portal which generated income of $25.9 million in 2008, up 9 percent over the previous year, and T2CN, a sports casual gaming portal in China, which grew revenue 119 percent to $19.7 million.
"A large increase in cash would allow the company to pursue higher profile game licenses and more effectively compete in the China online games market," Mr. Eilers said. "Furthermore, the timing might be right as European operators look to consolidate poker networks in an effort to compete more effectively against the private U.S. facing poker operators."
Assuming an Ebitda multiple of eight times across the 2009 fiscal year, Mr. Eilers believes Everest could fetch $310 million, which would leave GigaMedia with $362 million in net cash, or $6.00 per share.
Everest poker generated revenue of $104.5 million in 2008, up 17 percent over 2007, while casino grew 39 percent to $40.2 million during the same period.
Regarding the current status of negotiations between the two companies, a spokesperson for PartyGaming declined comment when contacted by IGamingNews, and a spokesperson for GigaMedia in Taiwan did not return an e-mail by press time Monday.
GigaMedia is thought to have been on the market since before its chief executive, Arthur M. Wang, made the sale-or-merger announcement on March 31 during a conference call with analysts and investors.
It is thought that sale documents -- containing details of Everest's financial performance -- were distributed to interested parties before Mr. Wang's announcement.
Additionally, The Times suggests GigaMedia has brought on the investment bank Goldman Sachs to seek a buyer.
Goldman acted as lead manager on GigaMedia's $238.4 million initial public offering in February 2000. The company's chief operating officer, Thomas T. Hui, also hails from Goldman's Hong Kong branch.
PartyGaming's interest in blazing the acquisition trail, meanwhile, was made known when it settled with the United States Department of Justice earlier this month. Chief Executive James A. Ryan said on a conference call then that the company had "identified targets," but didn't specify further.
Should GigaMedia elect to merge poker liquidity with another operator -- instead of selling the whole of its Everest gaming arm -- 888 Holdings and Gtech Corporation are thought to be the front-running prospective partners, a person familiar with those negotiations told IGamingNews earlier this month.
Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.