Starnet Communications International has announced the planning of a reorganization that will result in the company becoming a subsidiary of a parent company, World Gaming, Plc, incorporated in England and Wales. Starnet has filed a preliminary proxy statement/prospectus with the SEC to solicit shareholder approval for the change.
The proposed reorganization will be submitted to Starnet shareholders, who will have the opportunity to vote on the reorganization at a special meeting of shareholders, anticipated to be held in mid-December, either in person or by proxy. Prior to consummation of the reorganization, Starnet intends to have the ordinary shares admitted or authorized to trade on a stock exchange or trading facility in the U.K., U.S. or elsewhere, either directly as ordinary shares or as American depository receipts. The company's board of directors does not intend to consummate the reorganization if the company is unable to gain such admittance or authorization to trade its ordinary shares.
In connection with the reorganization, each Starnet shareholder will receive one ordinary share of World Gaming, Plc in exchange for each share of Starnet common stock. The exchange offer is only being made to existing holders of record of Starnet common stock on the record date.
The company believes that the reorganization will enhance shareholder value by allowing Starnet to capitalize on a business environment that is more supportive of companies operating in the online gaming industry and that allows for greater opportunity to pursue strategic business alliances and access to capital markets.
"Starnet believes that the United Kingdom provides us a more stable and predictable business and financial environment" said Fred Hazell, Starnet's chairman and interim president and chief executive officer.
The announcement, which comes days after the company announced a partnership with Poker.com, brings about one of many changes made by the company since facing a series of legal problems in 1999. The company engaged in a legal battle with former licensee Las Vegas Casino Inc. in the summer of '99 and shortly thereafter had its Vancouver operations, as well as the homes of several executives, raided by a group of authorities, led by the Royal Canadian Mounted Police, in conjunction with an investigation into illegal gambling activities. The events triggered a series of class action lawsuits filed by investors who suffered as the company's stock, once as high as $26, plummeted to under $5. The company continues to battle with LVC and has yet to resolve its situation with Canadian authorities. Its stock has continued to fall and has teetered under the $2 mark since late September.
While dealing with these adversities, the company moved its remaining Vancouver offices to Antigua and has overhauled its executive staff. Two CEOs, Mark Dohlen and Meldon Ellis, have resigned; the company is currently seeking a replacement for Ellis.
On the upside, the company recently began the phased launching of its long-awaited Beyond2000 software suite and pari-mutuel wagering service.
The announcement of the Starnet's restructuring provides an explanation for why the company is exhibiting at the World Gaming show this week under a "Beyond2000" sign rather than a "Starnet" sign.
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