Bwin.Party Digital Puts Social Casino Business up for Sale     

Online Social CasinoGibraltar-based online gambling operator Bwin.Party Digitial Entertainment, which came out with a year-end profit warning in line with the disappointing results of its 2014 operations, also announced that its Tel Aviv-based social casino games studio, Win is up for sale. The announcement stated that the company is currently in “active discussions” with parties interested in buying the social casino games company, as it is negotiating for a business combination that will create additional benefits for Bwin.Party.

Bwin created the social games studio Win in 2012, with plans to invest as much as $50 million within a two-year period. The company’s goal was to boost online operations by banking on the popularity of social games. However, as had been proven by other online gambling operators like Gamesys, 888Holdings and lately, Ladbrokes,  all of whom pulled out their Facebook-based social gaming sites in 2014, social casino games was not an effective tool for converting social gamers into real-money casino players. The year-end profit-warning statement disclosed that Bwin anticipates as much as $8.5 million (€7 million) in losses from its social casino gaming business.

The year-end press release explained that the company failed to attain the level of online business volume it had hoped to achieve. Bwin’s present estimate of its overall revenue for 2014 is around €608 million to €612 million, which is about 2.2 percent off from its projected revenue of €624 million. Aside from the losses sustained by its social casino games division, its online poker and sports betting operations were equally weak. The Gibraltar-based online gambling operator also expects losses of around €10 million from its online poker and casino gaming business in New Jersey.

Although the company saw money coming in from sports betting transactions during the 2014 World Cup Event, the actual cash that remained after the fourth quarter performance was lower by over two percent than the average 10.3 percent collection throughout the 12-month period. According to the statement, the gross profit earned by the Bwin sportsbook during the fourth quarter, particularly in December was “exceptionally weak.” After all, the term gross denotes that operating expenses including, interest, taxes, and non-cash annual expenditures such as depreciation and amortization, are yet to be deducted from the total gross collections.

Although Bwin.Party was able to achieve its 2014 €30 million cost saving goal, the company admitted that they still have to manage their costs in facing the reality of the rapidly changing online betting and gaming market. In a statement released via email by Philip Yea, the new Bwin.Party Board Chairman, he conveyed, “the company is fully engaged on delivering further value for shareholders.” He added that he is confident that their present efforts have the support of the company’s key institutional shareholders.

Mr. Yea’s recent appointment came after Jason Ader, Bwin’s activist shareholder, instigated a corporate reorganization this year. Mr. Ader contended that the company’s board, including the Chairman is not holding Bwin’s management accountable for the continuing under-performance, its loss of market share and poorly managed expenses, all of which have resulted to the decline of Bwin’s shareholder value.

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Mark Whysall