PartyGaming Acquires Cashcade

Ever since PartyGaming settled its accounts with the Department of Justice it was expected that it will enter the mergers and acquisitions market. True to these expectations it was reported in The Times newspaper last week that PartyGaming has acquired Cashcade. On Thursday, July 23, PartyGaming released a statement confirming the acquisition.

The statement included certain details about the purchase. The initial payment was of £71.9 million in cash with up to a further £24 million in cash depending on future profits.  Of this PartyGaming would have to pay £15.0 million in March 2010 if the company's 2009 EBITDA exceeds £15.0m, and £9.0 million in March 2011 if Cashcade's 2010 EBITDA exceeds £19.0m. In 2008 Cashcade generated a profit of £12.2 million, which was more than double the profit in 2007. PartyGaming will be funding the purchase from its existing cash resources.

The heads of both PartyGaming and Cashcade expressed satisfaction at the deal. Patrick Southon, Cashcade’s Managing Director, said that being a part of the PartyGaming group will help them leverage their existing business. Jim Ryan, PartyGaming Chief Executive Officer, said, “Cashcade provides us with an excellent platform to build a meaningful share of the $1.5 billion global online bingo market.  Our M&A objective is to acquire companies that can put us into a top three position in each of our four product verticals and deliver substantial revenue and cost synergies.” Cashcade is a leading bingo operator and will help PartyGaming achieve the objective.

Cashcade operates seven bingo networks, including top brands like Foxy Bingo, Mirror Bingo, Think Bingo and Cheeky Bingo. According to Bingoport.co.uk Cashcade has 23% of the United Kingdom online bingo market. On an average over 2,500 customers are concurrently logged on its networks daily. This is more than double of its nearest competitors Tombola and Gala Bingo. For the last two years Cashcade has been the leader in the United Kingdom bingo market and is now looking to conquer European countries like Sweden and Spain.

888.com was also believed to be in the running to acquire Cashcade. This would have been a logical step for 888.com because Cashcade runs on 888.com’s Globalcom bingo platform. Though the online gaming portal never confirmed that it was negotiating with Cashcade, it did say that it was looking for suitable acquisitions. Apparently the price offered by PartyGaming was too high and 888.com did not think it worthwhile to compete at that level. There were rumors that even Paddy Power was looking at Cashcade.

Independent News and Media has about 17% stake in Cashcade and will benefit from this transaction. Even more benefits will accrue to Cashcade’s directors and staff who own about half the company. The purchase by PartyGaming will mean a windfall income for them.

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