British sports betting firm Ladbrokes has entered into the early stages of negotiations to acquire online gaming giant 888. Shares in the publicly traded online casino firm rose nearly twenty percent on the London Stock Exchange when the news was released, although Ladbrokes has yet to make a formal offer.

 

 

Industry observers have noted that Richard Glynn, Chief Executive Officer of Ladbrokes, has been looking at opportunities to expand the company’s reach in the online gaming markets. Ladbrokes is already the leading sports wagering firm in Britain. The company runs a profitable online sports betting site, but its profits have lagged behind those of its rivals.

 

 

The two companies discussed a similar deal in 2006, but talks broke down after then-President Bush signed the Unlawful Internet Gambling Enforcement Act (UIGEA), which prohibits US-based banks from conducting transactions with overseas gaming sites. With the loss of the lucrative US gambling market, Ladbrokes backed away from the deal.

 

 

Two other major British online gaming companies, PartyGaming and SportingBet, have reached settlements with the US Justice Department regarding UIGEA violations. Executives with 888 have yet to reach such an agreement. The lack of an agreement exposes 888 to prosecution under the UIGEA and could dampen the appeal of any potential acquisition.

 

 

Reports suggest that Ladbrokes would offer 70p (US$1.08) per share for 888, for a total price of £240 million (US$371 million). The discussion follows the recent merger between PartyGaming and online sports betting site bwin. as consolidation in the online gaming market continues.