Britain's PartyGaming said on Friday it was buying the Internet gambling operations of smaller rivals Empire Online and Intercontinental Online Gaming for $66.3 million in shares.
PartyGaming said it expected Empire's Web sites, including NoblePoker.com and Clubdicecasino.com, to generate core profit of more than $6 million in 2007, while Intercontinental's sites, including MagicBoxCasino.com, will generate more than $2.5 million.
Empire Online, the brainchild of Israeli entrepreneur Noam Lanir, will retain about $40 million, which will be combined with its existing cash pile of $250 million to establish a fund for investing in equities, bonds, derivatives and real estate.
A PartyGaming spokesman said, "These deals bring good secondary brands, new revenue streams and strong management with proven marketing skills, especially in casino."
PartyGaming said the deals were expected to be earnings enhancing in 2007, and after completion it would strike a deal with Playtech, whose gambling software powers the acquired Web sites.
The group's shares were flat at 0827, after gaining 6% on Thursday when the news was widely reported, while Empire's were down 1.2 percent at 41-1/2 pence.
PartyGaming also said it would partly compensate employees for damage to its incentive scheme when the United States effectively banned online gaming in November, wiping about three-quarters off the value of its shares.
Chief Executive Mitch Garber will receive shares and a minimum bonus of 2 million pounds ($3.9 million) for staying at the helm through 2007. His incentives for staying until 2009 are now worth around 18 million pounds, compared to around 40 million before the share price collapse.
"It's important to move the company forward with the best team in place," said the spokesman.
PartyGaming and Empire have previously been partners, but suffered an acrimonious split last year when PartyGaming ring-fenced its own poker players from those of four affiliates including Empire, which relied on PartyGaming software.
The split hit Empire hard, knocking 10% off its profits, and causing it to sue PartyGaming last December.
That dispute was settled in February when PartyGaming bought assets including Empire's damaged EmpirePoker business for $250 million.
Empire said that after selling EmpirePoker and then pulling out of the lucrative U.S. market in 2006, it was no longer big enough to survive on its own.