Betting websites operator 888 (888) is accelerating its US gaming expansion by taking full control of All American Poker Network (AAPN). The company set-up AAPN in 2013 alongside US partner Avenue OLG Entertainment as a way of extending the reach of its popular 888poker and 888casino online businesses in the highly regulated online gambling market across the pond.
The original deal left 888 as the junior partner with a 47% stake in AAPN, and Avenue owning the rest. That situation has now changed with the UK company buying the 53% stake that it did not own from Avenue. The all-cash deal values Avenue's stake at $28m.
PULLING US GROWTH LEVERS
The plan is for 888 to use AAPN as a launchpad for new initiatives across the increasingly deregulating US market, both direct to consumers and via white label arrangements for third party gaming partners.
888 launched its first sports betting platform in September, in the state of New Jersey.
‘The US market could generate $10bn in gross gaming revenues by 2023, becoming the biggest in the world’, estimates Simon Davies, an analyst at Canaccord Genuity.
CONTROLLING ITS OWN DESTINY
He believes that this deal is an ‘important step’ in taking full control of its US growth strategy.
Investors seem to agree, with the 888 share price rallying strongly through mid-morning trading on Tuesday to hit 163.2p, more than 6% up on yesterday's close.
But patience looks likely to be required of shareholders with substantial start-up costs anticipated in the US initially as 888 gets its growth game going.
Davies forecasts $7m in start-up losses next year to 31 December 2019, gradually reducing in future years. But the speed at which early losses reduce will depend on how quickly 888 can get new products launched elsewhere across the States.
