Bwin.Party announced on Tuesday that an additional 10 million Euros of cost cuts would help the gaming company meet its yearly targets. The compayny has come under pressure from activist investor Jason Ader to boost its financial performance.
Since Ader and Bwin.Party came to an agreement last month, speculation has been that the company was facing a sale of its business or a break-up. Last month, the company had agreed to let New York-based Jason Ader name a certain number of board members. The point of the move was to make the compnay more efficient and boost shareholder value.
Sportsbetting Good, But Poker & Online Casinos Down
In a trading statement this week, Bwin-Party announced a boost for its sportsbetting win due to the World Cup football tournament in Brazil. At the same time, the online casino and card rooms run by Bwin.Party underperformed. The word used be the company to describe their performance was "soft"
The new proposed round of cost cuts are on top of the 20 million Euroes already cut from the company's budget. Bwin needs to cut costs to offset the startup costs of doing business through the new licensed online gambling business in New Jersey. The gaming company is also trying to offset financial losses from the loss of the Greek industry.
Norbert Teufelberger Discusses Full-Year Outlook
Bwin.Party CEO Norbert Teufelberger said, "We are taking steps to improve operating performance, simplify decision-making, reduce complexity and costs and, as a result, remain confident about the full-year outlook."
Bwin shares dropped to £85.10 this week, down over 30% in 2014. U.S. activist investor Jason Ader and his Spring Owl investment company bought 5% of the company and now has a position on the board of directors. Ader has been critical of how the company has been run since 2010.
BWIN and Party Poker Merger
In 2010, BWIN and Party Poker merged, creating the world's largest online gaming company. But Ader says the Gibraltar-based gaming enterprise did not merge efficiently, so he is pushing for significant changes to raise efficiency at Bwin.Party. The New York-based Ader, who sits on the board of the Las Vegas Sands Corp, was a respected Wall Street analyst for 11 years before becoming an activist investor in 2009. Since that time, he has become one of America's most notable investors.
Activist investors typically don't seek to take control of a company the way a traditional corporate raider would, but they instead seek influence on the board of directors. Such investors find companies they believe are under-performing, then influence the company to make fundamental changes that helps it reach its potential--thus increasing its value. Statistics show that companies influenced by activist investors outperform the S&P 500 companies.
GVC Holdings Increases Revenues
GVC Holdings, a London-listed smaller gaming company, has seen a leap in its market share over the past year. GVC Holdings purchased Sportingbet in 2013, giving it a major foothold in the lucrative Australian market. The World Cup has boosted revenues significantly this year.
GVC Holdings has a significant market share in Latin America. The 2014 World Cup was held in Brazil, which drove regional interest in the global football event. Not only did traditional World Cup powers Brazil, Uruguay, and Argentina advance to the elimination phase, but Colombia, Chile, Costa Rica, and Mexico all had competitive tournaments.
Typically, European teams win when the World Cup is held in Europe, while South American teams win when the World Cup is held in the Americas. Germany's defeats of Brazil in the semifinal and Argentina in the final gave Europe its first World Cup victory outside Eurupe or Africa. Previously, Brazil had won in Sweden in 1958 and in South Korea & Japan in 2002, but otherwise teams won when playing inside their hemisphere. Therefore, the interest in Latin America was particularly high this year.
Added 35 Thousand Customers
GVC Holdings says it attracted 35,000 new customers during the World Cup, which spanned the last month. A press release stated, "The 2014 World Cup in Brazil has been a resounding success in terms of recruiting new customers and generating increased revenues for the Group on the back of increased but effective marketing investment."
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