The moratorium on the expansion of online gambling left Gocorp Limited, among several other interactive gaming companies, in a serious bind. With an invalidated online gaming license and no viable revenue streams, the company was challenged with salvaging its $30 million AusVegas online casino venture amid a legal climate that yielded very few options. The answer ultimately came in a merger with competitor Lasseters Online--a deal that makes sense any way you slice it. We know what the merger means to Gocorp, but what does it do for Lasseters. Peter Bridge, Lasseters' managing director explains in an interview conducted last month at the Gaming & Casinos Convention in Gold Coast, Queensland.
We have been raising funds for our convention center development which was approved in December 2000. It would be difficult to raise these funds and issue an IPO at the same time.
Importantly, our business has also changed. Lasseters’ online business has now matured to the stage where it doesn’t need the backing of a land based business anymore.
We have developed a new direction for each part of our business and the best decision was to separate the land based and online divisions.
IGN: Is this a bail out of Gocorp because of the moratorium?
PB: It is a merger of two companies with the same core business to create the largest online gaming company in Australia. It is a deal that makes good business sense. Combined we have the strength of resources, technology, experience, and track record, and the benefit of multi-jurisdictional licenses that will help us become a real global force. It also establishes a critical mass of players.
IGN: What other options did Gocorp consider other than a merger with Lasseters?
PB: Our primary focus was to remain in substantially the same core business of online gaming. As such, we focused our energies on the option that would best leverage our core assets. That option was Lasseters as a successful online casino operator and the only one able to continue operating in Australia under the Federal Government’s moratorium.
IGN: What other options did Lasseters consider other than a merger with Gocorp?
PB: Over the past year we have looked at various structures for our IPO and options to merge with like businesses. We have also investigated a number of offshore jurisdictions for the potential relocation of the company. Our preference is, and has always been, to remain an Australian company licensed and regulated under Australian legislation.
IGN: Will Lasseters adopt the major costs of Gocorp’s operation (salaries, operating, costs, etc.)?
PB: The Gocorp operation has already been significantly scaled down and many staff have already left. We are merging two mature businesses with great assets. The high infrastructure costs associated with starting up an online business have already been incurred. The business is therefore now operating under an entirely different cost model. The integration of the two will also create synergies to lower costs further.
IGN: Will Gocorp leave Queensland?
PB: No, its status will not change. It is a Queensland registered company, Brisbane is its home stock exchange, it is licensed by the Queensland government and it has significant operations based on the Gold Coast.
IGN: When will the ASX suspension on Gocorp shares be lifted?
PB: We would anticipate the suspension will not lift until after the EGM of Gocorp shareholders.
IGN: Other dot-coms are struggling to generate revenue and show share growth. How will this new company fare?
PB: The new entity is different to many dot-coms in that it has a proven, successful e-business model with a track record for generating revenue growth.
Gaming services can be delivered very efficiently online as there are no fulfillment or distribution costs and the whole transaction is completed in real time online.
Lasseters Online is ranked as the most popular Australian website and one of the best online casinos by the large US market. We are turning over more than $20 million in online transactions each month.
We expect a strong positive performance in the 2002 financial year. Our priority is to restore shareholder confidence and value.
IGN: What will be the cash position of the merged entity?
PB: Gocorp will bring a minimum of $5 million in cash reserves to the new entity. Lasseters is debt free.
This means that unlike most dot comes, the new entity will have significant cash reserves. This gives us the strength to invest in our operations and expand so we can capitalize on global market opportunities.
IGN: What impact will the integration of the two companies have on the bottom line for 2001?
PB: There will be a one-off impact in the 2001 financial year because of the cost of integration. Gocorp is also bringing forward $27 million in losses. By the end of June 2001, all major leases and contracts will be renegotiated and the integration will be complete. We expect the synergies created by the merger and the strength of the combined resources will make 2002 a very good year.
IGN: What is the future of the deal with Max Lotto?
PB: This deal has been sanctioned for the pre-merger shareholders. It will not proceed with the new entity.
IGN: Will Gocorp proceed with its speculated suit against the federal government because of the moratorium?
PB: The Gocorp board has already written to Queensland and federal government representatives seeking compensation for the impact of the moratorium. The new board will continue to review all avenues for compensation as a matter of urgency. Its decision will be made in the interests of all pre-merger and post-merger shareholders.
IGN: How will the integration of the two operations get around the moratorium?
PB: The new entity will comply with the conditions of the moratorium. There will not be any new gaming services offered. The AusVegas site will not be operational.
The immediate opportunity is for the 7,000 Gocorp players to be merged into the Lasseters’ player base of more than 95,000. Gocorp could direct its players to Lasseters immediately enabling them to start wagering with Lasseters straight away.
IGN: What's the future for AusVegas?
PB: The company is committed to the online gaming and wagering space within the global market and on a multi-jurisdictional basis.
Subject to the federal government’s action, our intention is to operate both the AusVegas and Lasseters Online casinos. Potentially, they could be linked under a portal which uses a common purse and registration procedures allowing players to use a variety of online services.
Using core assets including the AusVegas brand makes sense in expanding our product offer and targeting a broader market in Australia and overseas. Gocorp, via both AusVegas and its Spincyle division, has significant intellectual property that the merged entity can take advantage of, such as gaming software.
Whilst AusVegas was only operating for a short time, it had established a good brand and shown signs of significant growth.
IGN: How is Lasseters going to adjust to being a public company?
PB: The reality is, we have been preparing to become a public company for two years as part of the planning for our IPO. So we know what to expect. Many of our financial and reporting procedures have already been changed to prepare for listing.
We will also have financial staff and Directors from Gocorp who will be part of the new entity and can assist immediately in refining some of these structures.