That's certainly the way it looks :-)
Net Promotions takes a punt on US casinos
16:51, Tue 19 Dec 2000
(Citywire research report)
Net Promotions will float on AIM early next year to take advantage of an ‘acquisition window’ for online casinos that will close if the US makes online gambling legal, writes Joanne Wallen.
The online gaming group, chaired by former Labour MP and television pundit Brian Walden, has just bought itself one such casino, iNetBet, from Atlanta-based Real Time Gaming. Managing director Alan Wheatley told citywire.co.uk it is hoping to make ‘one or possibly two more acquisitions’ to consolidate its position.
According to Wheatley, the ‘window’, has arisen because of the uncertainty surrounding online gambling in the US. Arizona senator John Kyle has tried and failed three times now to take a bill through Congress, initially trying to outlaw online gambling altogether.
In the early stages, Kyle had the backing of the major US bricks and mortar gaming houses such as MGM Grand and Harrahs, but these have since withdrawn their support, presumably recognising that if they can’t beat the online competition, they had better join them.
Wheatley said it now looks 99% certain that online gambling will be made legal in the US in the next 12 months ; if so, the big boys will step in, guns blazing. In the meantime, Net Promotions has taken advantage of the uncertainty to pick up iNetBet, which has a customer base of more than 100,000 and revenues of $200,000 a month, for just $3 million (£2.1 million).
Wheatley thinks this ‘window’ will last for another six to nine months only, before the existing casino’s will be taken out by the MGMs, Harrahs and others for considerably more than 15 months’ revenues.
So it's off to AIM, probably in March. The main purpose is to raise funds for new purchases, although Wheatley would not say how much he is looking for.
The other rationale for buying iNetBet was to gain instant access to its customer base. Wheatley said Net Promotions, which began operating a year ago, started out by spending £20,000 to £30,000 a week to advertise and market itself in the UK.
‘We were up against the big boys such as Ladbrokes and William Hill, who were spending vast amounts on marketing, and not making much impact. We thought it was far more sensible to go out and buy a business that already had customers’.
As well as gaining iNetBet’s customers, Net Promotions has also become profitable. It makes about 3% of the total bets placed, so for every $1,000 punted it would make $30, ‘which may not sound a lot, but there are huge amounts of money placed on bets’, Wheatley said. In addition, Net Promotions does not have the costs of a retail presence. It has just 10 staff and is forecast to turn over £250 million next year. citywire.co.uk |
