Bwin.party Digital Entertainment has agreed to a buyout offer from GVC Holdings of about 1.06 billion pounds ($1.62 billion), shifting its stance after the poker and sports betting firm had accepted an earlier offer from rival 888 Holdings.
GVC CEO Kenneth Jack Alexander told CNBC shortly after the deal was confirmed that he was "delighted" with the outcome.
GVC and 888 have been trying to outbid each other over the past few months in the battle for larger rival Bwin. Gambling firms are trying to bulk up in response to higher tax bills and tighter regulation in Britain and continental Europe.
Size is also seen as vital to ensure competitiveness in an online market buoyed by the use of tablets and mobile.
"I think it is absolutely crucial to have scale," Alexander told CNBC on Friday. "I think unless you have scale, you are going to struggle to compete in the space, in the coming years."
He said that both betting businesses would be combined onto Bwin.party's platform, which he described as "superior."
GVC's offer of 25 pence in cash and 0.231 new GVC shares works out to about 129.64 pence per Bwin share based on the stock's Thursday close.
The offer is at a 12.5 percent premium to Bwin's share closing on Thursday and at a 45 percent premium to its stock price since it first received proposals in May.
Shares in Bwin rose 3.6 percent to 119.3p in early trade, with GVC shares down 1.2 percent. 888 investors reacted badly to the news, with shares dropping almost 10 percent.
Alexander said there were a number of challenges facing the new business, but that he was," confident we will be able to meet these challenges in the coming years."
"You (will) have a great, powerful online gaming business that is more than capable of taking on some of the challenges," he added.
Bwin said GVC's higher offer as well as its track record of integrating acquisitions, such as that of Sportingbet in 2013, and a higher expected cost savings were all factors for switching its allegiance from 888.
Bwin had accepted a 900 million-pound cash-and-share offer from 888 in July, preferring it to a higher but more complex offer from GVC.
GVC said it would fund the cash portion of the deal through a 400-million-euro loan from Cerberus and would raise 150 million pounds through a placing of new shares.
-- Reuters contributed to this report.