Acquisition cost of Gioco Digitale underestimated

Like most other media and analyst estimations, we underestimated the value of the Italian gambling group Gioco Digitale earlier this month in reports on its acquisition by Bwin.  Reuters has released the real numbers this week, and they make interesting reading.
Bwin has confirmed that the purchase price is nearer Euro 115 million in shares and cash, but that the expensive acquisition will make Bwin the biggest online poker mover and shaker in the deregulated Italian market, reports the Reuters business news service.
Bwin agreed to buy 56 percent of Gioco for 2.3 million new Bwin shares, worth Euros 65 million at last Friday’s closing price. It will buy the rest for up to Euros 50 million in cash, Euro 5 million of which will be dependant on Gioco reaching 2009 earnings targets.
The new shares issued for the purchase represent 7 percent of Bwin’s outstanding capital.
Gioco had earnings before interest, tax, depreciation and amortisation (EBITDA) of Euros 9.2 million in the first half of 2009, which, if annualised, gives it a valuation of around 6 times this year’s EBITDA.
The deal is subject to Bwin supervisory board approval and is expected to close by early October 2009.
Gioco CEO Carlo Gualandri will join Bwin’s management team and will develop all of Bwin’s Italian business in the future.
Gioco is currently the biggest online poker brand in Italy with a market share of around 20 percent, while Bwin has around 6 to 7 percent, according to analysts.

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