Party Poker Parent Settlement with DoJ Rumors Drive up Stock

Several major media, including the New York Post, reported over the weekend that PartyGaming PLC, parent company of Party Poker, may be putting the finishing touches on a settlement with the United States Department of Justice (DoJ) regarding past U.S. online activities, driving its stock trade over 10% higher on the London market, the steepest gain since Oct. 25.

PartyGaming began negotiations with the Justice Department in June 2007 as industry concern spread about possible legal action against companies (in addition to action against Neteller) that took bets from Americans before the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA) barred financial institutions from handling transactions between U.S. residents and foreign online gaming sites.

Such concern may have held up possible PartyGaming merger activity, analysts say.

Any settlement by Gibraltar-based PartyGaming would be "material'' and would "give people a better idea what they were worth if they were open to acquisition,'' said Mark Brumby, an analyst at Blue Oar Securities in London.

AS HIGH AS $1 BILLION

Industry sources were quoted in the news saying that the settlement with the DoJ could be as high as one billion dollars.

The founders of PartyGaming, Ruth Parasol and Russ DeLeon, reportedly will both contribute to the settlement. They earned a $7 billion windfall when their company went public in London, and could be bankrolling part of the settlement to avoid shareholder backlash. The two, who are native Californians with a long history in the online gambling sector, have been permitted to enter the United States once again after years spent in Gibraltar.

One online-gaming authority, Joseph Kelly, a law professor at State University of New York-Buffalo, told the New York Post that a settlement was good thing, opening up more possibilities for mergers and other ventures.

"Their executives can also stop looking over their shoulders when they come to the US," Kelly said.

He added: "They may be paying a huge fine to get this behind them, but it won't get them any closer to online betting here anytime soon."

Analysts said a U.S. settlement may act as a trigger for mergers and acquisitions across the industry.

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